Royal Assent

The following Act was given Royal Assent:
Finance Act 2023.

Business: Greenwashing
 - Question

Lord Howarth of Newport: To ask His Majesty’s Government what assessment they have made of the practice of ‘greenwashing’ by businesses; and what steps, if any, they intend to take to tackle it.

Lord Callanan: My Lords, green claims made by businesses should be clear and accurate and not mislead consumers, who are increasingly looking to make environmentally friendly choices. The Competition and Markets Authority and the Advertising Standards Authority have published guidance to help businesses to comply with the law when making environmental claims about their goods or services. If a business does not comply with consumer law, the CMA and other bodies, such as trading standards, can bring court proceedings.

Lord Howarth of Newport: My Lords, while many businesses are genuinely committed to the net-zero objective, should not there be zero tolerance when businesses puff their publicity and accounts with dishonest claims about their green credentials? Does the Minister accept that for those businesses self-regulation will not work, that tough regulation and penalties are needed to deal with these fraudulent practices, and that the Government must work urgently with international partners to establish standardised accounting rules, an end to bogus carbon offsets, rigour in the definition of ESG, and reliable and clear information for investors and consumers?

Lord Callanan: I understand the point that the noble Lord makes, but businesses do not self-regulate in this area. In September 2021, the Competition and Markets Authority published guidance on environmental claims on goods and services, to help businesses to understand how to communicate their green credentials while mitigating the risk of misleading consumers. The Advertising Standards Authority has also taken action against some businesses.

Lord Wigley: My Lords, I draw attention to my registered interest. Does the Minister accept that there is real pressure on productive agricultural land, particularly in Wales and Scotland, from the big businesses buying up such land and taking it out of production, so adding to food cost inflation? Does he accept that perpetual increased afforestation encroaching on productive land is not an acceptable answer, and that it needs land use that sustains food production in an environmentally acceptable manner?

Lord Callanan: That is a fascinating question, although I am not sure that what it has to do with the subject under discussion. However, it is a very real issue and certainly something that we need to keep under close examination, because we do not want productive land taken out of use.

Lord Leigh of Hurley: Will my noble friend be able to give, now or later, an estimate of the cost of ESG reporting to British companies? The reason I ask is that an SEC commissioner recently stated that the cost to the 4,600 companies it regulates of providing ESG reporting is currently at $2 billion and expected to rise to $8 billion with the new regulations.

Lord Callanan: I know that my noble friend is very interested in this important subject; we have discussed it before. The problem we have is that many businesses make environmental claims about their sustainability and that others publish information in their annual reports—often voluntarily; there is, in some respects, no legal obligation to do so—so the question is about how investors can get transferability across different companies and compare one company against another. There may be a case for some standardisation and regulations in this space, but of course we need to look at the business impacts.

Lord Clark of Windermere: My Lords—

Baroness Hayman: My Lords—

Baroness Williams of Trafford: My Lords, I think that it is the turn of the Cross Benches, followed by the Lib Dems and then Labour.

Baroness Hayman: My Lords, does the Minister agree that if we are to take action on claims of greenwashing, we need clear criteria and standards against which to judge those claims? The Government have recognised that part of this is the need for a green taxonomy. Work has been done on this, yet it seems to have been paused. We were promised the results of the working party by the end of last year, so can he update us on progress on the green taxonomy? I declare my interests as in the register.

Lord Callanan: The noble Baroness is right that we need some consistency on these matters. The work on a green taxonomy is being taken forward by the Treasury and as far as I am aware it is proceeding.

Baroness Sheehan: My Lords, last year the Advertising Standards Authority ruled that HSBC’s greenwash ads were not adequately qualified and left  out material information about its greenhouse gas emissions. Does the Minister agree that a ticking off from the ASA after an ad has gone out is not a deterrent? Will he request the CMA to incorporate this into its green claims code so that financial penalties can be imposed if firms breach the rules repeatedly?

Lord Callanan: The ASA has taken action against a number of companies, including one that made green artificial grass, over their environmental claims. I think this is a very real deterrent to businesses repeating unfair advertising, but I know that the CMA is looking at a number of different sectors: it has already published an investigation into the fashion sector and is moving its investigations on to other areas of the economy as well.

Lord Clark of Windermere: My Lords, the noble Lord mentioned that the Competition and Markets Authority has issued its green claims code, under which it has the power to take errant companies to court. Have any actually been taken to court?

Lord Callanan: The noble Lord is right: the CMA published its guidance in September 2021. Enforcement of unfair claims and misleading advertising is a matter for trading standards. I am not aware of any claims that have been taken to court but, if there are any actions I can point him to, I will write to him.

Baroness Rock: My Lords, tenant farmers face acute risk of greenwashing, as landlords seek to take tenanted land back, to access public and private markets. The Rock review has already seen evidence of tenant farmers in England being served notices to quit for this purpose. What are the Government doing to ensure that we support our vital tenant farmers and do not lose tenanted land from delivering food and environmental outcomes?

Lord Callanan: My noble friend is right to point to this as an important issue. It does not fall within my purview as a BEIS Minister, but I will certainly find out the answer and write to her.

Baroness Blake of Leeds: My Lords, green- washing is clearly a serious issue which, if not clamped down on, will seriously hinder progress towards net zero. We welcome the steps being taken to do this, such as green taxonomy, increased ESG reporting requirements and investment in product sustainability labels. All these measures should mean that communicating ESG credentials will become critical to companies, as well as compliance with legal requirements. All are steps in the right direction. Can the Minister outline the timeline for their implementation and what assessment the Government have made of the impact of the changes proposed?

Lord Callanan: There are a lot of questions in what the noble Baroness said, and there are a number of different aspects to this problem. The Advertising Standards Authority and the CMA are taking action,  our net-zero strategy contained several commitments around eco-labelling, and we are working with the Financial Conduct Authority to introduce a sustainable investment label. Those are all proceeding at the moment.

Baroness Boycott: My Lords, it is well known that food, agriculture and deforestation account for a very large amount of greenhouse gases and biodiversity loss, yet it is impossible for a consumer to tell when buying a product exactly what its biodiversity impact or carbon content is. All big food companies rail against putting this on labels, on the grounds that it would take up too much space. That is fair enough; they can put it online, where nerds such as me can look it up to see whether it is okay. What are the Government doing to make labelling correct in terms of those two factors? Have they at least started a consultation and is there any news on when they might implement it?

Lord Callanan: The noble Baroness referred to looking at information online. I am sure she will be pleased to know that the CMA has launched a website to help consumers to identify and understand genuine environmental claims about the products and services that they are purchasing. It is designed to encourage them to ask themselves simple questions about whether they can believe the claims that manufacturers are making or not.

Baroness Jones of Moulsecoomb: My Lords, I was going to mention Amazon as a prime example of a company that uses greenwashing, but the Government are also very much a greenwashing organisation. They constantly laud their environmental principles, but then the Prime Minister, for example, hops into a private jet to go to Leeds instead of taking the train like the rest of us. Does the Minister agree that the Government need to correct some of their greenwashing?

Lord Callanan: There are things we could all do. The noble Baroness talks about the Prime Minister taking jets; she might want to talk to one of her Green council colleagues who, I believe, flew up to COP 26 in Glasgow. There are always improvements we can all make in our personal behaviour.

Prisons: Chaplaincy Service
 - Question

Lord Singh of Wimbledon: To ask His Majesty’s Government what assessment they have made of the working of the prison chaplaincy service; and in particular, the extent to which representatives of all faiths are included in the discussions of the Prison and Probation Service’s Chaplaincy Council.

Lord Singh of Wimbledon: My Lords, I beg leave to ask the Question in my name on the Order Paper, and in doing so declare my interest as director of the Sikh Prison Chaplaincy Service.

Lord Bellamy: My Lords, since 1996 the chaplaincy council has helped deliver prison chaplaincy based on multiple faiths and beliefs. However, it no longer reflects the breadth of faith and belief of those in prison or on probation. We therefore propose to replace the chaplaincy council with a chaplaincy faith and belief forum representing all faiths. We will consult widely on that proposal and related reforms, including the smaller faiths in particular.

Lord Singh of Wimbledon: I thank the noble and learned Lord for his Answer, but until three years ago the chaplaincy council was working well. Why replace something when it is not broken? A prison chaplaincy council representing the six major faiths has not met for some three years, with Hindus, Sikhs and Buddhists being excluded from policy discussions and discriminated against in grant support, visiting and educational hours and career opportunities. Widening the prison chaplaincy council will worsen that situation. Why are our concerns and complaints consistently ignored by those charged with the promotion of inclusion and diversity, who feel that all they need to do to fulfil their remit is write pronouns after their names?

Lord Bellamy: First, I pay a personal tribute to the noble Lord, Lord Singh, for all that he has done over many years for prison chaplaincy and for his tireless efforts on behalf of the Sikh community. I mean that most sincerely. However, respectfully, I do not entirely agree with the thrust of his question. In the Government’s view, the chaplaincy council needs to be brought up to date to make sure that all faiths are properly represented and, in particular, to make sure that the faith and belief advisers, who assist the Prison Service, particularly in the appointment of chaplains, and who are very often on the council, are remunerated and appointed transparently and consistently so that there is no question of any difference of treatment in that regard. It is perfectly true that there has been some disagreement with the noble Lord, Lord Singh, in the past—that I accept—but I hope that the reforms that we are in the process of consulting on will remove any scope there may be for disagreement on the way forward.

Baroness Hayter of Kentish Town: I pay tribute to those who have done so much in this area. The Minister has again used the words “all faiths”. I wonder if he will include humanists in the consultation, because there are many who would welcome chaplaincy from a humanist understanding as well.

Lord Bellamy: The answer to that, my Lords, is yes.

Lord Cormack: My Lords, bearing in mind that the whole purpose of prison is rehabilitation and that chaplains have a very important role to play in that context, can my noble and learned friend tell me how many prison chaplains of each faith there are at the moment, and whether he is satisfied that this number is sufficient to accomplish the very important task before them?

Lord Bellamy: My Lords, to the best of my knowledge, there are approximately 1,200 prison chaplains overall and approximately 20 chaplains of the Sikh faith. I do not have other figures in front of me. Sikhs make up less than 1% of the prison population, which is extremely admirable, and the number of Sikh chaplains in particular is well out of proportion to the number of Sikhs who are unfortunately in prison.

Lord Sahota: My Lords, when deciding on the policy of the Prison and Probation Service with regards to its pastoral service, the views of all faiths should be taken into account. I was surprised to learn from my friend, the noble Lord, Lord Singh of Wimbledon, that this is sometimes not the case. I sincerely hope that the Government take these views into account and look into this matter urgently.

Baroness Burt of Solihull: My Lords—

Lord Bellamy: I can give the noble Lord the assurance that he seeks.

Lord Pearson of Rannoch: My Lords, is the Minister aware that some 60% of our managing prison chaplains are now Muslims, while only some 17% of our prisoners share that faith? What do the Government think this imbalance may be doing for the promotion of Islamism in our prisons, and what do they feel they should do about it?

Lord Bellamy: My Lords, I have no reason to suppose that the Muslim chaplains in the chaplaincy service, where they are appointed, are doing anything other than providing multifaith belief and support to the whole of that prison population.

Bishop of Chelmsford: My Lords, on Christmas Day, I was pleased to be able to visit my local prison and young offenders’ institute in Chelmsford, where I was taking a service. I had several conversations with both prisoners and members of staff who expressed concern about ensuring continued support for those who are leaving prison and re-entering the community. As the work of multifaith community chaplaincy and indeed the Welcome Directory continues to be developed to support those leaving prison, can the Minister say what discussions there have been, if any, regarding possible funding support from HMG?

Lord Bellamy: As the right reverend Prelate pointed out, the Government already support and fund the Welcome Directory. That resource enables prisoners to seek help to resettle safely in the community. Each probation region may commission and fund local services, including community chaplaincy services. The Government will keep these funding arrangements under review, in view of the importance of the rehabilitation of prisoners in the community.

Lord Ponsonby of Shulbrede: Over a decade’s worth of Conservative government has led to a failing prison system, with failing rehabilitation. To change this, we need an evidence-led, trauma-informed approach to rehabilitation. Prisons now contend with a revolving  door of staff, with constant recruitment failing to fill the vacancies across the estate. This is a crisis made by the Government, because of cuts and a lack of investment in the justice system. What will the Minister do to retain experienced staff and recruit new staff?

Lord Bellamy: My Lords, the Government can point with some pride to a fall in reoffending rates in recent years and an extensive programme of recruitment for not only prison staff but the probation service. In terms of the discussion today, which is about chaplaincy, we look forward to greater involvement of chaplains in sentencing planning, resettlement planning and the steps taken when prisoners are released to ensure that their release is successful and that they do not reoffend.

Baroness Burt of Solihull: My Lords, I apologise for my earlier overenthusiasm. Prison chaplaincy provides a very valuable pastoral and counselling service for all prisoners and staff in the Prison Service. Chaplains are forbidden from proselytising and have a general responsibility to help all who seek help and advice. However, given that according to the 2021 census 37% of the population have no faith at all, has the time not now come for non-religious pastoral carers to be included in the new chaplaincy, faith and belief forum?

Lord Bellamy: My Lords, it is the Government’s intention to see that that happens.

Lord Farmer: My Lords, my noble friend the Minister has touched on prisons and probation, but where does the role of chaplaincy sit within the “One HMPPS” programme for achieving greater alignment between prison and probation and a whole-sentence approach? There has in the past been limited joint working between probation staff and prison chaplains, even at key points in the sentence, such as when planning for release. Also, prison chaplaincy sits within HMPPS and community chaplaincy is carried out by the voluntary sector, independent of government.

Lord Bellamy: My Lords, the Government seek greater alignment between prison and probation. The chief probation officer will be a member of the new council of faith and belief. A new pilot will see prison chaplains attending approved premises to which released prisoners go and there will be further collaborative work with the Community Chaplaincy Association.

Public Service Ombudsman for England
 - Question

Lord Hunt of Kings Heath: To ask His Majesty’s Government what plans they have to create a new single Public Service Ombudsman for England (and reserved UK matters) with modernised powers in line with the Venice Principles of international best practice standards, endorsed by the United Kingdom in United Nations resolution A/RES/75/186.

Baroness Neville-Rolfe: My Lords, the Government have no plans at this time to create a new single public service ombudsman for England. The Government are supportive of the ombudsman institutions and the general principles of the Venice Commission, and will consider specific proposals on ombudsman reform. We do not currently view large-scale ombudsman reform as a priority for this Parliament.

Lord Hunt of Kings Heath: My Lords, that is a very disappointing response. We have 20 ombudsmen. It is often very confusing for members of the public taking a complaint to find which one applies to them, particularly where complaints straddle boundaries between, say, health and local government—on a delayed discharge from the NHS into social care, for instance. Putting them all together, alongside the local government and housing ombudsmen, would ensure a much more co-ordinated response and provide much better value for money. Will the Government reconsider this?

Baroness Neville-Rolfe: The trouble is that combining the existing public services ombudsmen—there are several, as the noble Lord explained—would be a complex and substantial undertaking. It could lead to a reduction in the quality of service for people relying on that service during the transition period, and staff would worry about their futures. I am not sure quite what just putting them together would achieve. The key thing is to have expertise and effective ombudsman decisions, which we have increasingly seen in recent years.

Lord Wallace of Saltaire: My Lords, I had not realised until I went into the background of this Question that we have 20 different ombudsmen in the United Kingdom. Nor had I realised that one ombudsman deals with the health service and another one deals with social care, which seems to be not very well organised. Nor had I realised, furthermore, that you have to go through your MP if you want to go to the Parliamentary and Health Service Ombudsman. Does the Minister not think that there are a number of problems within the existing set-up that the Government ought at least to look at again?

Baroness Neville-Rolfe: As I said in my opening remarks, some changes we are able to look at, and we have made improvements. On the MP filter, which the noble Lord refers to, it is designed to help complainants. MPs are able to make confidential inquiries with officials or Ministers and resolve issues quickly. In addition to referring individual cases to be investigated by the ombudsman, they can raise issues publicly in the House of Commons. The ombudsman has a democratic element. It is a parliamentary creature and I think it helps to hold the Executive to account. Of course, the PACAC takes a great deal of interest and is responsible for the appointment of the ombudsman, who is a parliamentary officer.

Lord Etherton: My Lords, does the Minister agree with the view of the peer review of the PHSO by the International Ombudsman Institute, completed in  November last year, that the compulsory MP filter for complaints to the PHSO in his capacity as parliamentary ombudsman is a breach of the requirement of the Venice principles that people raising complaints should have a right to free and unhindered access to the ombudsman. The evidence is that some 88% of people who mistakenly come direct to the PHSO in his capacity as parliamentary ombudsman do not return with their complaint when they realise that they need to go to their MP first. Should not the MP filter be made optional as soon as possible?

Baroness Neville-Rolfe: I think I have already commented on the MP filter. We do think that the international principles are important, but we also need to make sure that the existing system, which focuses very well on individuals, is not undermined. I was looking at the website today and I was struck by how this does not look only at big and well-known cases but at individual ones; for example, a man died days before his wedding to his partner of 40 years due to a hospital failing, and remedies were put forward by the ombudsman. The MP filter, a democratic element, really is important in the complaints process.

Baroness Hayter of Kentish Town: But, my Lords, MPs are not able to do that sort of inquiry when they get something from a patient; all they can do is say, “Yes, I agree with it”, and forward it on. What we know, as the noble and learned Lord said, is that nine out of 10 people who first go to the ombudsman and are then told they cannot do it without an MP supporting them go no further. How does the Minister explain to those nine out of 10 that they have no access to redress for anything that has gone wrong?

Baroness Neville-Rolfe: On the health area, there was an extensive debate during the passage of the Health and Care Act last year, and I will reflect further on the point the noble Baroness has made and come back to her. However, in some areas such as the DWP there is of course an independent case examiner, which also helps with the flow. We are talking about big numbers here already. I was looking at the figures: there were 5,330 PHSO cases in 2020-21, so it is important that we find a way of resolving complaints, not necessarily through the ombudsman. You need a combination of the two systems.

Lord Bellingham: My Lords, surely moving to one overarching body would save substantial money in terms of sharing HR and administrative costs and other overheads. No one is suggesting that there should be an immediate transition, but surely a gradual transition would make a lot of sense.

Baroness Neville-Rolfe: One always hears these arguments in relation to agencies; for example, we put some together to form the Environment Agency. Although there were many pluses, there was also a transition. I remember being in the Business Department when the Department for International Trade was split off. There is a transition cost, which was the point I was making at the beginning. We are talking about a Government  with a lot of priorities. As my noble friend says, if we are going to have reform, this is not an immediate priority, but that does not mean that we are not looking at possibilities to improve these things all the time. That is very much what the Parliamentary Ombudsman himself is always trying to do.

Lord Fox: My Lords, I think I heard the Minister say that the Government have made improvements to the overall system. Can she tell us what those improvements are and how we might recognise them?

Baroness Neville-Rolfe: Partly as a result of work by PACAC, the ombudsman has improved transparency. There are now summaries of decisions on the website in a user-friendly form. The website shows how people who have problems can apply to the ombudsman or go to other sources if they are not eligible to do so. It also allows us to keep up to date with complaints. As I said, the reporting style is more user-friendly, and that is important with complaints.

Baroness Chapman of Darlington: My Lords, this is about public confidence in our public services. If the system was working as well as the Minister seems to want to suggest, public confidence in our public services would be improving. Can she name a single public service, such as health, education or policing, where public confidence has improved over the past 13 years?

Baroness Neville-Rolfe: I am tempted to say that I will write to the noble Baroness. Obviously, there are surveys and things that I do not have to hand today because I came to talk about the ombudsman, not public services in the round, but there have been considerable improvements in many public services for business and for citizens. Clearly, the Covid epidemic has caused enormous problems, which have led to difficulties with public services.

Lord Watts: What about the war in Ukraine?

Baroness Neville-Rolfe: As the noble Lord says, the war in Ukraine has caused problems as well. We also face a challenging demography in this country. All these things have an effect, but this Government are determined to improve public services. That is a very important objective and I am trying to help with it from the Cabinet Office; I am trying not to make difficulties worse by, for example, inspiring changes that will potentially cause substantial difficulties for the flow of casework, which is so important. I come from a business background. Dealing with complaints well is very important.

Lord Bird: My Lords, is it also possible to look at the fact that, if you have a financial complaint, you can wait over a year to get it sorted? I know a number of people who are finding that the financial problem they brought is very pressing, and waiting over a year is not an answer.

Baroness Neville-Rolfe: The noble Lord always talks good sense. I agree with his point in relation to the public sector ombudsman, but he is talking about financial services, which are the subject of private financial services ombudsmen; they are different and operate through the regulatory system. So there is a mixture of public service ombudsmen and, in some sectors, private sector ombudsmen; they deal with things in a different way, such as through membership, fees and so on.

Excess Deaths in Private Homes
 - Question

Baroness Merron: To ask His Majesty’s Government what is their assessment of the reasons behind ONS figures showing excess deaths in private homes in England and Wales in the week ending 23 December 2022 were 37.5 per cent higher than the five-year average for the same period.

Lord Markham: My Lords, while the detailed assessment is not yet available, it is likely that a combination of factors has contributed to an increase in the number of deaths at home, including high flu prevalence, the ongoing challenge of Covid-19, and health conditions such as heart disease and diabetes. On 12 January, the Office for Health Improvement and Disparities will update its excess deaths report, providing further insight into causes that have contributed to excess deaths.

Baroness Merron: My Lords, while a patient may choose to die at home, the spike in home deaths rings considerable alarm bells. Analysis suggests that record ambulance and emergency delays could be the explanation for a significant number of many more sudden deaths that are occurring at home. Can the Minister point to any government analysis, whether published or ongoing, to explain this unexpected increase in home deaths and a potential link with these delays? If there is no such analysis, how will the Government know how to overcome this shocking state of affairs?

Lord Markham: I thank the noble Baroness. This is an important question, and I had the opportunity to speak to Sir Chris Whitty on this very subject this morning. The statistics show that, over the course of the year, home deaths have increased by about 22%—a lot of that through personal choice, because it was happening over the summer and earlier in the year. Sir Chris told me that a lot of factors are in play at the moment. Flu is a clear example. There were about 1,000 more deaths in the week mentioned than would normally be expected. The cold snap came early, creating more cardiovascular deaths. However, clearly, the challenges are also a component part, which is why we made yesterday’s announcements about the further measures.

Lord Allan of Hallam: My Lords, we are fortunate to have in the Office for National Statistics a source of trusted data to inform our policy deliberations. It provided essential data about excess deaths during the pandemic, and we should equally reflect on what this data says about the health of our nation post-pandemic. There is clearly a range of potential factors that could have led to the excess deaths, as the Minister has outlined, but it is really in the public interest to test all those hypotheses and establish any causality. Can the Minister commit the department to carrying out research, such as the noble Baroness, Lady Merron, asked for, into any potential link between the pressures that we know about on the ambulance service and the excess deaths at home?

Lord Markham: Again, I spoke further to Sir Chris Whitty exactly on this. He writes an annual report on this. We will be doing so in the same way and looking at all the factors.

Lord Stirrup: Can the Minister tell the House what happened to cancer diagnosis and referral times during the course of 2022, and what the prognosis is for these crucial measures over the coming year? If he does not have the statistics to hand, can he write to me and place a record in the Library?

Lord Markham: I will happily provide the detail on that. We all know about the 62-day challenge. That has been the focus of Ministers ensuring that we are bearing down on that number, so that an increasing proportion are treated within that period.

Lord Hannan of Kingsclere: My Lords, some of these numbers plainly reflect the diagnoses and the treatments that did not happen during the pandemic, as my noble friend the Minister has suggested. Given that we now know that the OECD country with the lowest excess death figure during those two years was Sweden, does my noble friend the Minister believe that, knowing what we now know, we would have locked down?

Lord Markham: My noble friend makes a challenging point. This will be a subject of the inquiry, on which I look forward to hearing more.

Baroness Pitkeathley: My Lords, does the Minister agree that one of the elements here may be the lack of support to family carers, who are often the element most involved in providing care at the last stages of life, and in particular the lack of willingness to engage with family carers, who are the people who know most about the condition? I have lost count of the number of family carers who have said to me, “They just didn’t want to know my side of this element.”

Lord Markham: I thank the noble Baroness. We have spoken before about this in the House. I agree with the general point that family carers, probably more than anyone, have great knowledge to bear, and so absolutely that should be an important component.

Lord Dobbs: My Lords, it is blindingly obvious that lockdown has had a huge impact on the number of excess deaths. Indeed, many people warned of that consequence at the time. I will put it politely: at that time, the Government showed a deep lack of interest in the points being made. We are now talking about excess deaths in the hundreds of thousands, quite apart from the extraordinary impact that it has had on mental health, particularly for young people. Could he please promise that the Government will take every step, and then go a step further, to ensure that the inquiry into this by the noble and learned Baroness, Lady Hallett, deals with what we got wrong as well as the many things that we got right, to make sure that we are properly prepared for a future challenge if it should ever arise?

Lord Markham: I totally agree with my noble friend. We all know that it was an unprecedented time, and we learned lessons all the way through: we were much more resistant to locking down as time went on, for all the good reasons mentioned by my noble friend. Yes, that absolutely needs to be a key feature of the report.

Lord Laming: My Lords, the Minister will agree that a very important point in all of this has been the restrictions now in force on primary healthcare services and domiciliary services. We have left housebound people to their fate for a great deal of this time. Is the Minister willing to look at these matters?

Lord Markham: It is a whole-system issue, as I have often mentioned in this House, that takes into account some of the elements of home care, and very much the social care and dom care elements. We know that that is very much a factor in the 13,000 beds that we need to free up through things such as dom care, so yes.

Lord Scriven: My Lords, excess deaths started to rise in June of last year—at the same time, interestingly, as long waits on trolleys in A&Es started. These have got worse as A&E trolley waits have increased. What did Professor Whitty say about that statistic? If nothing, will there be a review into the waits on trolleys in A&E as a possible cause of excess deaths?

Lord Markham: This whole area is all about the number of beds and the occupancy. This analysis was done around the October plan for patients, where we said that we were going to put in 7,000 beds and a £500 million discharge fund. What was clear, as per the announcement yesterday, was that the high level of Covid beds—9,500—and the over 5,000 flu beds were far more than any of us estimated. That increased bed occupancy means that we have had to look to increase supply again and at the number of discharges to social care. That is the root cause of the problem. That is why we acted again yesterday to provide even more care in those places.

Lord Davies of Brixton: My Lords, although my noble friend quite rightly emphasised the particularly concerning figures in a particular week, this is a reflection of a longer-term trend that has taken place. Does he  accept that a particular concern is the high number of non-Covid-related deaths during the last summer? Normally, you expect to see a dip during the summer, and it simply did not take place this time. Is he seized with the urgency of dealing with this issue?

Lord Markham: I am definitely seized with the urgency. I was able to speak to Sir Chris Whitty about a number of those, including last summer. The heatwave was a factor then: we had over 2,500 excess deaths caused by the heatwave over those couple of weeks. There were multiple factors. You have heard me say, again from Sir Chris Whitty, that cardiovascular disease is a real concern: for those three years that people missed going to their primary care appointments, they did not get their blood pressure checked in the same way, and we did not get the early warning indicators. That is another thing that you will hear me talk further about, so that we can get ahead of the curve, because those are the areas of excess death that we risk in future.

Lord McColl of Dulwich: My Lords, have we not forgotten something? When we blame all sorts of factors for these excess deaths, have we forgotten that there are 44 million people in this country suffering from the disease called obesity and all the complications that arise from that? This means that these people are moving inevitably to a premature death from a variety of very unpleasant diseases.

Lord Markham: My noble friend makes a good point that prevention is a key part of this agenda, as is the role that we all take in our individual health and well-being. Obesity is included as a key part of this as well. We need a four-pronged approach that tackles the things that we as individuals need to address as well, to make our own lifestyles healthier.

NHS Winter Pressures
 - Statement

The following Statement was made in the House of Commons on Monday 9 January.
“Mr Speaker, I wish to take this first opportunity to update the House on the severe pressures faced by the NHS since the House last met. I and the Government regret that the experience for some patients and staff in emergency care has not been acceptable in recent weeks. I am sure that the whole House will join me in thanking staff in the NHS and social care who have worked tirelessly throughout this intense period, including clinicians in this House who have worked on wards over Christmas. They include my honourable friend the Member for Lewes, the Minister for Mental Health, and the honourable Member for Tooting, the shadow Minister for Mental Health.
There is no question but that it has been an extraordinarily difficult time for everyone in health and care. Flu has made this winter particularly tough: first, because we are facing the worst flu season for 10 years—the number of people in hospital with flu this time last year was 50; this year, it is over 5,100.  Secondly, it came early and quickly, increasing sevenfold between November and December. It also came when GPs and primary and community care were at their most constrained. When flu affects the population, it affects the workforce too, leading to staff sickness absence that constrains supply just as it also increases demand.
These flu pressures came on top of Covid. Over 9,000 people are in hospitals with Covid, while exceptional levels of scarlet fever activity and an increase in strep A have created further pressure on A&E. All that comes on top of a historically high starting point. We did not have a quiet summer, with significant levels of Covid, and delayed discharges were more than double what they were during the pandemic. I put that in context for the House: in June 2020, there were just 6,000 cases per day of delayed discharge—patients medically fit and ready to leave hospital—whereas throughout last year the figure was between 12,000 and 13,000 per day. The scale, speed and timing of our flu season have combined with ongoing high levels of Covid admissions in hospital and the pandemic legacy of high delayed discharge to put real strain on front-line services.
Since the NHS began preparing for this winter, there was a recognition that this year had the potential to be the hardest ever. That is why there was a specific focus on vaccination. There were 9 million flu shots and 17 million autumn Covid boosters. We extended eligibility more widely than in the past, to cover the over-50s, and became the first place in the world to have the bivalent Covid vaccine, which tackles both the omicron and the original Covid strain.
NHS England also put in place plans for the equivalent of 7,000 additional beds, including the introduction of virtual wards of a sort that one can see at Watford General Hospital. That innovation is still at an early stage of development, but has the potential to be significant in reducing pressure on bed occupancy in hospitals; in Watford alone, it has saved the equivalent of an extra hospital ward of patients. In addition, our plan for patients put £500 million specifically into delayed discharge, with a further £600 million next year and £1 billion the year after. Although the funds are already starting to make a difference, efforts have taken time to ramp up operationally with local authorities and the local NHS.
In addition, our 42 integrated care boards, recognising how bed occupancy in hospitals and social care are connected, will fully integrate health and care in the years to come. But likewise, they are at an early stage of maturity, with ICBs having become fully operationalised only in July 2022, less than six months ago.
Our plans involving the integration of hospital care and social care, additional funding for discharge, increased step-down capacity, the equivalent of 7,000 additional hospital beds and a vaccination programme at scale have provided the groundwork for the government response, but it is clear we need to do more right now in light of the level of flu and Covid rates and given that hospital occupancy remains far too high and emergency departments are too congested. Recognising that, we launched the elective recovery taskforce on 7 December, and in the coming weeks, we will publish our urgent and emergency care recovery plans. NHS   England and the Department of Health and Social Care have been working intensively over Christmas on these plans, which were reviewed with health and care leaders at an NHS recovery forum in Downing Street on Saturday.
The recovery falls into three main areas of work: first, steps to support the system now, given the immediate pressures we face this winter; secondly, steps to support a whole-of-system response this year to give better resilience during the summer and autumn—as we have seen with the heatwave this summer and with the levels of Covid, pressure is now sustained throughout the year, not just, as in the past, during autumn and winter—and, thirdly, our work alongside those two areas on prevention, on maximising the step change potential of proven technologies, such as virtual wards, and on the wider adoption of innovations such as operational control centres and machine reading software to treat more conditions in the community, away from someone reaching an emergency department in the first place.
Let me first set out the measures I can announce today to provide support to the NHS and local authorities now. First, we will block-book beds in residential homes to enable some 2,500 people to be released from hospitals when they are medically fit to be discharged. When that is combined with the ramping up of the £500 million discharge funding, which will unblock an estimated 1,000 to 2,000 delayed discharge cases, capacity on wards will be freed up, which will in turn enable patients admitted by emergency departments to move to wards, which in turn unblocks ambulance delays. It is important, however, that we learn from the deployment of a similar approach during the pandemic by ensuring that the right wraparound care is provided for patients released to residential care. I have asked NHS England to particularly focus on that, so that it is the shortest possible stay on patients’ journey home and into domiciliary care, and indeed it is in the NHS’s own interests for those stays to be as short as possible. Taken together, this is a £200 million investment over the next three months.
Next, our A&Es are also under particular strain. From my visits across the country I have seen and heard how they often need more space to enable same- day emergency care and short stays post emergency care. Our second investment is in more physical capacity in and around emergency departments. By using modular units, this capacity will be available in weeks, not months, and our £50 million investment will focus on modular support this year. We will apply funding from next year’s allocation to significantly expand the programme ahead of the summer. We are giving trusts discretion on how best to use these units to decompress their emergency departments. It might be for spaces for short stays post A&E care, where there is no need for a patient to go to a ward for further observation, or for discharge lounges that previously have not been able to take patients in a bed—many of those are often simply chairs—or for additional capacity alongside the emergency department at the front end of the hospital.
The third action we are taking to support the system right now is to free up front-line staff from being diverted by Care Quality Commission inspections over the coming weeks, and the CQC has agreed to  reduce inspections and to focus on high-risk providers in other settings, such as mental health. Those are the actions we are taking that will have an immediate effect.
I turn to the measures we are taking now that will give greater resilience into the summer and next winter. We now have 42 NHS system control centres in operation across England, staffed 24 hours a day, seven days a week, tracking patients on their journey through hospitals, helping us to identify blockages earlier and getting flow through the system. Where we have implemented these systems, such as the one I saw in operation in Maidstone, they have had a clear impact. We will therefore allocate funding in next year’s settlement to apply these systems more widely.
Similarly, we have also seen how the use of artificial intelligence and data can demonstrably reduce demand and release patients sooner. NHS England has been tasked with clarifying and simplifying the procurement landscape, taking on board best international practice, so that a small number of scalable interventions are taken forward where international experience shows they can deliver meaningful benefits to patients.
Next, we will capitalise on the incredible potential of virtual wards. Last week at Watford General Hospital, I saw how patients who would have been in hospital beds were treated at home through a combination of technology and wraparound care. Patients released sooner are often much happier, knowing that they are receiving clinical supervision and always have the safety net of being able to quickly return to hospital should their condition deteriorate. There is scope to expand these measures to many more conditions and many more hospitals in the months ahead.
We are also opening up more routes for NHS patients to get free treatment in the independent sector and offering even greater patient choice. The elective recovery taskforce is helping us to find spare operating theatres, hospital beds and out-patient capacity.
We must also take steps in primary care. We are clear that our community pharmacists can support many more things to ease pressure on general practice. From the end of March, community pharmacists will take referrals from urgent and emergency care settings; later this year, they will also start offering oral contraception services. But I want to do even more, as they do in Scotland, and work with community pharmacists to tackle barriers to offering more services, including how to better use digital services. The primary care recovery plan will set out a range of additional services that pharmacists can deliver.
Finally, notwithstanding very severe pressures, we know that to break the cycle of the NHS repeatedly coming under severe pressure, the best way to reduce the numbers coming through our front doors is to address problems away from the emergency department. On Friday, we signed a memorandum of understanding with BioNTech—a global leader in mRNA technology —to bring vaccine research to this country, which will give as many as 10,000 UK patients early access to trials for personalised cancer therapies by 2030. This builds on the 10-year partnership we struck with Moderna in December to also invest in mRNA research and development in the UK and build state-of-the-art vaccine manufacturing here.
We are also reviewing our wider care for frail, elderly patients in care homes long before they ever get to A&E or our hospitals. Take the brilliant work being done in Tees Valley, where community teams are being used to help with falls to prevent unnecessary ambulance trips to hospitals. We have looked at what more support we can offer elderly patients further upstream. With an ageing population, and many more people with more than one condition, it is clear that we have to treat patients earlier in the community and go beyond individual specialties to better reflect patients with multiple conditions to give the right support to people where they are, which is often at home or in residential homes.
Today’s announcement provides a further £250 million of funding, which recognises the spike in flu on top of Covid admissions and high delayed discharge numbers from the pandemic. The funding will provide immediate support to reduce hospital bed occupancy and decompress A&E pressures, and, in turn, unlock much-needed ambulance handovers. This funding builds on the £500 million announced in the Autumn Statement specifically for discharge, which is ramping up, and the additional funding for next year.
All this work ultimately builds on the much-needed greater integration of health and social care through the 42 integrated care boards, which we will strengthen through the Hewitt review, and through a step change in capability, including operational control centres.
This immediate and near-term action sits in parallel with our wider life science investment, such as the deals with BioNTech and Moderna, and underscores our commitment to recognising the immediate pressures on the NHS and investing in the science that will shift the dial on earlier, upstream treatment at scale, particularly for the frail elderly, long before a patient reaches an emergency department. This is a comprehensive package of measures, and I commend this Statement to the House.”

Baroness Merron: My Lords, from this Statement one might conclude that the NHS is facing challenges but that, overall, things are moving in the right direction. This could not be further from the truth and does not reflect how dire the situation has become. It is clear that the Government have failed to grasp what everyone else has managed to: that there is a deeply urgent crisis in health and social care, where irrevocable damage is being done to people’s lives.
While on the one hand the Government are bringing in legislation that will mean that NHS staff can be sacked for exercising their right to strike, on the other they are refusing to conduct meaningful pay negotiations that could end the strikes in the health service. Indeed, they only thought to convene an NHS recovery forum this week, when we are already half way through the winter.
It is increasingly becoming clear that the sporadic pots of money proposed as sticking plasters for various pinch points are not being deployed quickly enough. For instance, the £500 million emergency adult social care discharge fund was announced in September, but some half of it still has not yet reached the front line. The NHS has now said that it is too late to make a difference to the winter crisis. Has the Minister identified  what is stopping the funding coming through? What plans are in place to deal with this so that funding can promptly get to where it is needed? It is no good making announcements and then not following through.
Nor is it easy enough to work out whether funding is new or recycled money. I hope the Minister will be able to clarify this now and in the future. The nature of this Government’s approach to funding health and care—half a billion pounds here one week, another few million there—gives the impression of knee-jerk reactions rather than strategic policy-making. In fact, the approach is so last minute that, after making the announcements in yesterday’s Statement, an extra £50 million was suddenly found and a further press release was issued.
Yet we know that prevention is better than cure in every sense. A GP appointment costs the taxpayer much less than a desperate patient turning up at A&E. Is the Minister content with this eternal hole plugging? What plans are there to move towards a more holistic and sensible long-term approach, including plans to fix primary care so that patients can see the GP they want in the manner they choose? What plans are there to recruit the care workers needed to care for patients once they have been discharged from hospitals, and to pay them fairly so that we do not lose them to other employers? As ever, where is the comprehensive and detailed workforce plan to train the doctors, nurses and health professionals that the NHS so desperately needs?
Underlying this has been an abject failure to make the social care system sustainable. Half a million people are waiting for social care assessments. They clearly are at major risk of having to be admitted to hospital as a result. How will the Minister work to prevent this, especially when care workers are leaving in droves to work in retail and other sectors? Is there a government target for when the number of people waiting for assessments, often in pain and discomfort, might finally start to come down?
The Statement cites Covid, flu, strep A, scarlet fever, and even CQC inspections as reasons why the NHS is under such strain. Is this not surely passing the buck, when other countries face similar challenges and yet are not gripped by such chronic crises every single winter?
In the context of an ageing population where demand on the system will only increase, is the Minister willing to assure your Lordships’ House that a sustainable social care solution will finally be produced before the next winter hits? The NHS Confederation has responded to yesterday’s Statement by referencing the obvious contained in the Government’s words on the need for
“the right wraparound care for those being discharged from hospital”.
The NHS Confederation also says that
“after a decade of austerity neither the social care sector nor the government are in any position to ensure it.”
Does the Minister agree with that analysis: that it is the choices of this Government over the past 12 years that have had a direct and devastating impact on the current delays? It is this fundamental that the Statement has failed to address.

Lord Allan of Hallam: My Lords, we welcome the fact that the Government are making a Statement, as it is abundantly clear to everyone that we have a crisis on our hands, and we on these Benches have been calling for this to be recognised as a national major incident. In that context, will the Minister clarify the status of the NHS recovery forum that was announced with great fanfare last week? Was it a one-off, or will it be meeting regularly and taking ownership of this crisis? If it is not the NHS recovery forum, what group within government will be taking us through the rest of the winter? This requires daily, serious leadership at the highest levels in government.
I have three questions on the specific measures outlined in the Statement. First, the Government have told us about the block-booking of care home beds, which should provide some immediate relief for hospitals, but they are much less clear on how they plan to increase domiciliary care so that people who can and should be in their own homes do not get stuck in care homes unnecessarily. The last thing we want to do is to move people out of one inappropriate care setting into another one, and domiciliary care remains the key to providing the best care for the vast majority of people who need neither hospital nor permanent care home residency. Can the Minister offer us any assurances on what the Government intend to do about domiciliary care provision?
Secondly, the Statement referred to the new NHS system control centres that will be in each integrated care board area, and which are a welcome development. There is published information about the data that will go into these new centres, but no information about what the centres themselves will make available to the public. Does the Minister agree that it would be helpful for people to know much more about the pressures on the NHS in their local area through these NHS system control centres publishing regular updates with as much information as they can provide to help patients make informed choices, with full knowledge of where the blockages are in the system?
Finally, the Statement referred to the use of artificial intelligence systems to help release patients sooner and track their progress through hospitals. There have been recent press reports about Welsh hospitals using tools developed by a British company called Faculty AI to improve patient discharges. Can the Minister add any insights into how these and similar technologies are going to be tested and deployed in England? I know that nothing is a silver bullet, but the reports suggest that they could make a significant difference to discharging people more efficiently and quickly. If that is so, we do not need to wait to deploy these technologies, and should be getting on with it.

Lord Markham: My Lords, I thank noble Lords for their comments. As I mentioned in answering the previous Question, this is a reflection, from our part, of trying to understand the situation. We did some plans in October and looked at demand and supply, and that led us to make the announcements about the 7,000 extra beds and the £500 million adult social care discharge fund. It was clear to us that the bed occupancy issue was going to be at those danger points, and that was the plan.
Then, of course, as with any plan, you amend and review it all the time. Over the last few weeks of December, with the onset of flu beforehand, it became clear that we had higher levels of bed occupancy than we had planned for at that time because we had 7,000 or so extra beds taken up by flu while, at the same time, still requiring higher levels of Covid care than planned. It became clear from all this that the bed occupancy levels were still too high to be comfortable. This was causing the knock-on impact on the flow across the whole system, backing right up into the A&E wait times. That is why, very responsibly, we looked at the latest data, planned, and realised that we needed to do more. That was very much the components of the plan.
In answer to the point from the noble Baroness, Lady Merron, some of those short-term measures were about bringing in extra adult social care funding packages and, candidly, looking within every area of our budgets at what we really needed to spend over the rest of the year and at what we could prioritise. We managed to make some in-year savings through reducing headcount, particularly in admin and central areas, and then looked to redeploy that to make sure it was going to the front line.
As well as that, we looked at things such as the expandable modular space. This goes back to the flight control systems, which I would recommend to anyone. It is well worth a visit to Maidstone, where you will see what we plan for the longer term and what we are looking to do across the system in time for next winter. It became very clear there that, because it has the data, it can manage demand and supply. It sees the incoming from the ambulances; it sees the bed situation; it sees those people who are getting close to be ready for discharge. It is working with clinicians to say, “Actually, we’ve got some incoming and we need to free up that space. Let’s get the social care places ready. Let’s have transport ready and clean the bed quickly.” It is absolutely those micro-improvements and the Team Sky cycling-type approach that address it. AI comes in very much as part of that; you can speed up the flow all the time. It is not silver bullet stuff, but it is about looking at those micro-improvements as you go through it. That is very much the background to all this.
Dom care is an important aspect of that as well. I went through the stats with the team today, which said that of the 13,000 people ready for discharge, probably only 3% should require social care in the long term, and the other 97% should be in a home environment. Some of them might need a few weeks, which is where those care packages come in, and a lot of them need dom care, but 97% of them should not be in care going forward. That is why we need to focus these things towards that. That is the thinking behind this.
The modular space is an important component of this. Look at Maidstone again; it has looked very carefully at the patient flows and at where you can have same-day emergency care and get people out again so that they never have to go into a hospital. But you need extra space to do that. We have made this available so that the hospitals can decide where they most need that expandable space—whether it is pre-A&E, when they are finished in A&E and waiting in a decent  space for a bed to come free, or step-down or discharge areas. It is about providing that flexibility and putting it in place quickly for them all.
What we were trying to do here was show flexibility and be fleet of foot to be able to course correct as time goes on; to put our hands up and notice when things were difficult and more challenging because bed occupancy was higher than expected—as I say, due to flu, Covid and other factors—and put in the measures to address them. That is exactly what we are doing in the short term.
In the longer term, next year—not that many people would say that nine or 10 months away is the longer term—we need to make sure that adult social care has further funding, as the House has heard me say many times. There will be a substantial increase next year, up to £1.7 billion, and a substantial increase the year after, of up to 20%. With flight control systems, expandable modular care and the rollout of virtual wards, we have a number of things that, on their own, are not a silver bullet, but, by putting them all together, you will start to get the changes and improvements that we expect to see. I say unashamedly that, if there are other facilities in the independent sector that we can make use of, be it making more use of pharmacies or expanding virtual wards, then we should do so.
I am sure there will be more questions as we go on in this debate, but I hope your Lordships can see that we have tried to respond to the challenges through a range of measures that we believe will make a difference. At the same time, we must be open to the need to do more; we will need to add more things and course correct as time goes on.

Lord Patel: The Minister may not agree, but the NHS is in crisis. He may say that the situation is “challenging”, but it could not be more challenging. Although infection rates related to Covid, flu and other infections may have exacerbated the situation, the genesis of the crisis is not of today’s making. It has been in the making for years. It is related to lack of capacity. Does he agree that the emergency measures now being put in place are not likely to work? If they are not likely to work, what is plan B? Importantly, what is the long-term plan to ensure that this does not continue into the spring, summer or next winter?

Lord Markham: I absolutely think these measures will improve the situation; I would not be putting them forward if I did not believe that. At the same time, just as we put out plans in October and are amending them now, I will continue to amend our plans. I think that is a flexible, responsible approach: you have a plan, you adapt that plan, you invest and you continue to improve. That is what we will continue to see and do; we will see those improvements go through this year and into the next.

Lord Grade of Yarmouth: My Lords, my noble friend the Minister mentioned pharmacies in his response, which clearly demonstrated a complete lack of understanding of the crisis that is going on in the independent pharmacy sector. They are closing at an  alarming rate, yet they are the front line of the NHS, with record numbers of people coming to see them for free medical advice because they cannot get in to see their GP. There is a very serious crisis in the independent pharmacy sector, which is vital for healthcare. I have had many meetings, I have had letters, and I have got a campaign going in the media. It is clear from the responses that the department does not have a clue about the extent of the crisis and the closure of these independent pharmacies. Something needs to be done before they all close.

Lord Markham: I wholeheartedly agree with my noble friend that the pharmacies are the front line. We realise that they have been underutilised in the past. Actually, the plan of using them more for patients will put more funding their way, which I hope will support them, just as allocating Covid vaccinations to many pharmacies provided support. I hope my noble friend will see that this plan should add to the viability of a number of pharmacies by putting more business their way. They are a crucial part of the front line.

Lord Turnberg: My Lords, this focus on the number of hospital beds may be at the wrong end. It is much more fruitful to think about why staff are so dissatisfied and unhappy that they wish to leave and do so in droves. We have to do more to improve the morale of the nursing and medical professions and, in particular, those who work in the community—the care workers. We are losing them in great numbers; they are not coping. The reason is partly their pay, and we must pay them a reasonable rate, but it is also that they are completely disillusioned as people do not take them seriously. They do not have a professional qualification or a proper training programme. They do not have the possibility of career progression. We must do more to encourage them and ensure that they have a satisfactory career. If we do, we could possibly get more patients out of those beds that were building up, and perhaps help reduce the queues of ambulances.

Lord Markham: I agree that we need a whole-system approach. Workforce is a key part of that, including the adult social care workforce. Again, as all noble Lords did, I welcome the advent of the agreement to do a workforce plan, which needs to take all these factors into account. We need to make sure that it is an attractive place to work, and that people see it as a career progression—and that it is modular so that you can start in social care and, if you want to, progress into other parts of the health service.

Baroness Brinton: My Lords, I declare my interest as a vice-president of the LGA and vice-chair of the All-Party Group on Adult Social Care. Nearly three years ago, the Government created Nightingale hospitals, which were much vaunted and had millions spent on them. Virtually all of them were useless because there was no staffing available for them at short notice. I listened to the question from the noble Baroness, Lady Merron, about the short, medium and long-term workforce plan. We are now in emergency time: there are 160,000 social care vacancies and 40,000  nursing vacancies, which includes those in social care. How is this unblocking of beds going to be staffed and by when?

Lord Markham: Obviously, prior to this, we were in touch with the adult social care sector to make sure that there was that capacity within the system for it. We have been assured that the capacity exists, but we wholeheartedly agree that we need to recruit the staff to fill those vacancies, which is why we have taken measures to recruit internationally as well as in the domestic recruitment programme. Those are all key components of the longer-term plan to solve this issue.

Lord Kakkar: My Lords, I remind noble Lords of my declared interest as chairman of the King’s Fund. The Statement made yesterday in the other place refers to a primary care recovery plan. It is well recognised that the hospital system is not sustainable if primary care cannot discharge its important gatekeeper function. Is the Minister able to confirm that, as part of that plan, there will be a radical review of options that might be adopted to ensure that primary care can deliver its important function?

Lord Markham: Yes, this is very much the focus of my colleague Minister O’Brien. I think it is understood that as many as half of the people who turn to up to A&E could have been looked after by the primary care system, so a lot of the pressures caused are as a result of that. It is absolutely a whole-system problem; many of the issues at the front end are about the GPs and at the back end they are about adult social care, which is why we need to address the whole system.

Lord Balfe: My Lords, last month, I had the dubious privilege of staying at one of the Minister’s hospitals. I was struck by the sclerotic way in which decisions were taken. It seems that the whole premium is on safety rather than looking after the patient. I would ask that the department looks into the way in which decisions are made, because I found far too often that a decision was made on the basis of what was safest. The multidisciplinary team, as it was called, was basically there to deflect anyone who wanted to do anything very adventurous. Will the Minister start looking, maybe in selected hospitals, at ways in which the decision-making and care process can be speeded up and made less sclerotic?

Lord Markham: I have seen very good examples of where that works. You have clinicians in the room with the data—the management and bed information. They make decisions according to the flow and number of people who they see are going to need a bed from the ambulances and the A&E situation, and the number who are ready to release. You have clinicians united with the information to make good decisions. Those are the best. The idea with the longer-term plan is to make sure those “best” have the tools in terms of the flight control system and have management processes in place so that they can adopt and follow best practice.  It is key to what we are looking to make sure we have in place in time for next year, as the noble Baroness, Lady Merron, mentioned.

Baroness Bennett of Manor Castle: My Lords, the Minister replied to my Written Question on 5 January about commercial companies promoting strep A tests. The Answer said that these are “not currently recommended” by NICE
“for individuals aged five years old and over … with a sore throat”
and that UKHSA is conducting a
“bedside review of existing antigen-based lateral flow devices”
to
“identify the tests that are most likely to perform well”.
Given that, can the Minister explain why I have a number of emails from DAM Health headed “Concerned about strep A? Order your home test kit today. Only £12.99 per test kit. Quick and reliable results within minutes”? Can the Minister truly put his hand on his heart and say there is sufficient regulation and oversight of private testing companies, and indeed the broader private health sector? Is it not profiteering from the crisis in the NHS, potentially damaging the NHS and putting more pressure on NHS services?

Lord Markham: First, I declare an interest in this space. As many noble Lords will know, I set up a Covid testing company which never did any business towards the Government; I am very pleased to say that it served only the private sector. I am disposing of it as part of my obligations as a Minister. As the question relates to testing, I am quite keen to put that on the record.
Secondly, I would say “absolutely”. Dare I say it, but the reason my company was so successful is that we set the very highest standards according to the regulators. That is why we were able to win the crème de la crème—the Formula 1s and Wimbledons of the world. I cannot speak for other companies which may not be taking that high level of support, but there is absolutely a role for the regulator to make sure that only effective tests are marketed and those which are not effective should not.

Baroness Armstrong of Hill Top: My Lords, I wonder whether the Minister—I hate to say this—will recognise that, too often, it feels that the Government have no institutional memory, have no ability to learn from what has happened in the past and keep trying to reinvent the wheel while the wheels are spinning away long before they get anywhere near. The King’s Fund recently published a report on how the last Labour Government brought down waiting lists. That report shows that you do not just have to shout about it; you have to put in place all the different steps, including the right financial flow.
From all that has been said today, it is clear that the right flow is to encourage more people into social care work and encourage and enable them to do more serious, high-level work like urine testing. The Government have not even begun to think about this. Until financial support for the whole flow and the financial incentives to change the things the Government need to change are there, and that is understood by Ministers, we will  not get it. It is not enough to say, “We’re putting another £15 million or £50 million into this, that or the other”, without making sure that you know how it is going to be spent and that people are going to be there to deliver it.

Lord Markham: I have said before in this Chamber —and I will say it again—that we should be learning all lessons. I like to think that, three months into my role, I am learning some of those lessons. The noble Baroness will see that we have taken some backwards steps on the use of the independent sector, which, again, was pioneered 15 or 20 years ago, but hopefully we will move forward again. I unashamedly say that we can learn from those things. I have spoken to some colleagues from the noble Baroness’s side of the House, and will continue to, because I will adopt anything that works, and I agree that payment by results is one of those things. We can speak after these questions; my door is definitely open on those matters.

Baroness Jolly: My Lords, I have the privilege to chair the NHS national community nursing plan clinical reference group. We meet on a regular basis and look at how community nurses can keep people out of hospital and get people home from hospital. We have heard very little about that today. Can I have five or 10 minutes with the Minister at some stage to bring him up to speed on the work that is going on?

Lord Markham: As with my answer to the previous question, I look forward to that meeting and learning everything we can. I will repeat the statistics on that subject that struck me most: of those 13,000 people who are fit to be discharged, we think that only 3% need to be in social care in the long term; 97% could be at home, which is the best and most cost-effective place for them. We need to ensure that the support is in place to ensure that that option exists.

Baroness Watkins of Tavistock: My Lords, I declare my interests as a nurse and as a new appointment to the NHS England board as a non-executive director. There are two things missing from this discussion. First, there has been no reference to people waiting for mental health support. How can we ensure that people in mental health crisis are moved rapidly out of busy A&Es to be supported in quieter environments? There is a very good example across the road, at St Thomas’ Hospital, which is helping the A&E. Secondly, it is high time that we seriously consider giving full-time contracts to care workers in domiciliary services, because, as soon as somebody goes into hospital, the care worker’s hours are cut and, although they know that individual, they very rarely get reallocated to them when they are transferred back out of hospital. The lack of continuity of care often results in readmission, so what will the Minister do to ensure that, in the way that the noble Lord, Lord Turnberg, just outlined, we improve the lot of those particular care workers?

Lord Markham: First, I welcome the noble Baroness to the NHS England board, with high expectation of the value that she will add to it. I am  very interested to understand her point further; I will speak to Minister Whately about that and respond to the noble Baroness in writing. Where people have knowledge of a patient at home, they can add that to their care when they come back out again.

Lord Lansley: My Lords, one of the lessons we learned, sometimes very painfully, during the earlier stages of the pandemic was the importance of working with, and often through, local government to tackle some of these issues. The same is true now. Would my noble friend explain how the NHS will use discharge funding and purchase social care provision? Will integrated care boards do that locally with local government, which has been managing social care purchasing for decades?

Lord Markham: I thank my noble friend. The best ICBs that I have seen have the local authority as part of their board and their decision-making on a day in, day out basis. One of the best control systems that I saw in an ICB actually had the local authority social care people in the room making the decisions with them, so they are a key element in all of this. On purchasing and funding, they are very much a strong player.

Lord Watts: The Government have spent 13 years cutting the number of beds and they are now reversing that and starting to increase it, which is welcome. The other thing that they have done is to constrain pay in the NHS and social care. They have an opportunity to do something about that. Why are they not taking the opportunity to boost pay in both those sectors to address some of the problems that we face?

Lord Markham: I welcome what I hope, over the past few days, has been better mood music—let me put it that way—in this space. I hope from the different things that we see that we will get closer towards a landing zone where we can reach agreement going forward. We know from both sides that neither side wants to be in this dispute. My hope very much is that constructively—with good will on both sides, which we are seeing—we will find a way forward.

Police and Criminal Evidence Act 1984 (Codes of Practice) (Revision of Code A) Order 2022
 - Motion to Approve

Lord Sharpe of Epsom: Moved by Lord Sharpe of Epsom
That the draft Order laid before the House on 13 October 2022 be approved.
Relevant document: 15th Report from the Secondary Legislation Scrutiny Committee

Lord Sharpe of Epsom: My Lords, this order was laid in draft before Parliament on 13 October 2022. It will bring into effect a revised code of practice  issued under Section 66 of the Police and Criminal Evidence Act 1984, which I shall call “PACE” from now on. This is PACE Code A, which governs the exercise by police officers of powers to stop and search a person without first arresting them. For England and Wales, PACE sets out the core powers of the police to prevent, detect and investigate crime. The exercise of these powers is subject to codes of practice, or PACE codes, which the Secretary of State is required to issue. The PACE codes put in place important procedural safeguards for the public and detainees when the police exercise their powers.
The proposed amendments to PACE Code A, which we are discussing today, relate to police powers to stop and search individuals subject to a serious violence reduction order, which I will refer to henceforth as “SVROs”. Inserted into the sentencing code by the Police, Crime, Sentencing and Courts Act 2022, SVROs are civil orders which give the police powers to stop and search individuals convicted of an offence where a bladed article or offensive weapon was used or was present. Cracking down on knife crime is a priority for the Government, and SVROs are an important part of that crucial endeavour. By increasing the risk of detection, these orders are designed to deter habitual knife carriers from reoffending, as well as to help prevent exploitation into continued criminality, including further weapons carrying.
We must build an understanding of the impact of the new orders, so the issuing of the orders will be piloted in West Midlands, Merseyside, Sussex and Thames Valley police force areas. The pilot will be independently evaluated before a decision is made on rollout of the orders across England and Wales. We have proposed these revisions to PACE Code A to ensure that proper guidance and safeguards on the use of the new stop and search power are in place for the pilot.
The proposed revisions were subject to a statutory consultation, which ran for six weeks; they introduce a new temporary annexe, G, which deals with searches in relation to SVROs. In particular, the code highlights that the power does not require officers to have prior reasonable grounds, but its use must not be based on prejudice; it highlights that searches can be conducted only on those subject to an SVRO, and that officers should seek to confirm the identity of the individual; it outlines that the use of the power, like all other stop and search powers, is discretionary, and that officers will be expected to use their judgment when choosing to conduct searches; it outlines that the new annexe will apply for 24 months, plus an additional six-month transitional period; and it outlines the territorial extent of the use of the powers. While SVROs will be issued only in the pilot police force areas, the stop and search powers will be available across England and Wales.
On concerns around disproportionality and the impact of stop and search on particular communities, our aim is for these orders to enable police to take a more targeted approach, specifically in relation to known weapons carriers. The code of practice is just one of many safeguards in place to ensure the fair and proportionate use of SVROs. The revised code was laid before Parliament together with the draft order and Explanatory Memorandum. Subject to the order  being approved, the revised code will come into force on 17 January 2023. I must highlight that this date is not a fixed date for the commencement of the SVRO pilot: we are ensuring that all the appropriate secondary legislation is in place before commencing in early 2023.
Fighting crime and protecting the public are central to the Government’s agenda. I therefore commend the draft order to the House and I beg to move.

Amendment to the Motion

Lord Paddick: Moved by Lord Paddick
At end insert “but that this House regrets that the draft Order does not restrict the powers of police constables to stop and search people without suspicion to those limited geographic areas piloting Serious Violence Reduction Orders, but instead permits all police constables in England and Wales to make use of this power during the time of the pilot.

Lord Paddick: My Lords, I have tabled my amendment because the concession we reasonably believed we had secured from the Government, to limit new without-suspicion police stop and search powers to specific geographic areas, is not being delivered. As the Minister explained, the Government now want the new police powers to be used throughout England and Wales during the pilot.
As the Minister explained, the Police, Crime, Sentencing and Courts Act 2022 gives the police a new power to stop and search anyone who is subject to a serious violence reduction order, or SVRO, without any reason to suspect that they might be carrying something they should not carry. A court can place a serious violence reduction order on anyone convicted of any criminal offence if they, or anyone they were with at the time of the offence, had a knife on them, whether it was used in the commission of the offence or not. This goes far wider than making it easier for the police to stop and search those convicted of knife crime.
The key to violence reduction is not stop and search, but police and communities working together and turning offenders’ lives around. The former Commissioner of the Metropolitan Police said that the police could not arrest their way out of knife crime. The success of such schemes as Operation Trident in London were the result of the police and the black community working together, for example. Having visited projects there, I know that the success of knife crime reduction in Scotland has been based on turning offenders’ lives around, particularly at teachable moments when offenders have themselves been seriously injured.
You are 14 times more likely to be stopped and searched by the police if you are black than if you are white, using existing without-suspicion stop and search powers, with about one in every 100 searches resulting in a knife being found. Having such a large number of people being stopped and searched who are not committing any offence, and who the police have no cause to suspect are committing any offence, can lead to a breakdown in relations between the police and communities—one of the keys to successful violent  crime reduction. Allowing the police to stop and search an unlimited number of times, without suspicion, someone who has already served their sentence and could well be trying to turn their life around, as these new powers allow, is likely to damage any attempts at rehabilitation. Those in danger of reoffending may see no point in trying to be good citizens when they are being treated by the police as criminals even when they are doing nothing wrong.
When these measures were debated, we believed the new powers could be counterproductive and we told the Government that we were prepared to vote against them, with the support of the noble Baroness, Lady Meacher, who led on amendments to this part of the Bill. As a result, the Government agreed to a pilot scheme, geographically limited to a few specific police areas—not court areas, police areas. The pilot scheme would be independently evaluated to establish whether the new powers reduced violent crime in those specific police areas. On that basis, we agreed not to vote against the measures. Following discussion with the police, the Home Office has now agreed to allow the new police without-suspicion stop and search powers to be used throughout England and Wales during the pilot, with the only geographic restriction being to limit the courts that are able to issue SVROs, limited to the specific police areas that were originally agreed.
We made it clear to the Government that it was the new police powers that we objected to, and it was on the basis that they would be limited to certain geographic police areas that we accepted the government concession. It was never discussed, let alone agreed, that the powers of the courts to issues SVROs would be treated separately from the powers of the police to enforce them. As a result, not only have our concerns about the use of these new police powers damaging police/community relations and offender rehabilitation been ignored, but it is difficult to see how the pilot can be effectively evaluated if part of it is limited geographically and the other part is limitless.
There are also practical problems with serious violence reduction orders, such as how police officers are supposed to know that someone is subject to an SVRO, particularly if the power can be exercised over such a wide geographic area, where those subject to them are not likely to be personally known by the officers. Someone innocently walking down the street who is not subject to an SVRO is under no obligation to provide their name and date of birth to the police—the minimum requirement for a check to be made on the police national computer to establish whether they are subject to an SVRO. In that case, can the Minister explain how these orders will work in practice?
The Police Federation, which represents the overwhelming majority of officers likely to use these new powers, was asked to comment on the debate in the other place on this statutory instrument. Among other things, its representative said:
“I imagine we would be deeply concerned about moving away from a form of stop and search that isn’t rooted in ‘Reasonable Grounds’. We could easily make a case that this leaves officers vulnerable to complaint, ‘post stop’, in an area which is already supercharged as an issue in many communities. Reasonable Grounds has a firm legal basis, is tried and tested, and therefore affords reassurance to our colleagues engaged in these stops. The SVRO  removes that need … and inadvertently that reassurance. It also strikes me that they are predicated wholly on the stopping officers having prior knowledge of the person being searched, so what happens when this power is used to stop somebody and their identify cannot be confirmed—you then have no reasonable grounds to fall back on, and are potentially left wide open to the ‘you only stopped me because I am black’ allegation. On the face of it, the officers’ only rational [response] if such an allegation came their way would be ‘I believed you were subject to a SVRO’, confirming the allegation [‘that you only stopped me because I am black’] and not ending well when identity has been mistaken.”
That is the view of the representative of rank-and-file police officers: that these powers are likely to place them in jeopardy, particularly if they use them outside the pilot areas where those subject to SVROs are unlikely to be known to the officers carrying out the stop and search. What consultation was there with the Police Federation on these powers?
The Government need to rethink their plans for a pilot scheme. For these reasons, I beg to move the amendment in my name on the Order Paper.

Baroness Jones of Moulsecoomb: My Lords, I spend my life being furious at the Government, as I am sure some noble Lords will recognise. However, I want to spare a moment of sympathy for the Minister, who has had to bring this to your Lordships’ House. Clearly, this is going back on a promise; the Government are cheating. They are choosing not to honour a promise. That is really rather disgusting, as it shows a complete lack of respect for your Lordships’ House. I really hope that the noble Lord, Lord Paddick, who has made a brilliant opening speech, will take this to a vote, because clearly we would have voted on these issues before if we had had the chance. We trusted the Government, but this shows that we cannot. That is very depressing because, if you cannot trust your Government, the whole of democracy falls apart.
I am also worried about the fact that the Government are putting the police at a disadvantage. Trust in the police is at an all-time low, and I think these measures will make it much worse. We worry all the time about the police being distrusted. They cannot do their job if they do not have the support of communities. Of course, with this sort of measure, there will be social and racial barriers to implementing it, and there will be disparities about who the police target. The Government are actually making life much harder for the police. There should not be a power to search without reasonable suspicion.
While I am talking about not trusting the Government, I should say that they are also treating peaceful protest like gang and knife crime. I just do not understand why the Government cannot see the difference between those things. Dissent is healthy; it is part of our democracy. In measure after measure and legislation after legislation, it seems to me that this Government are saying, “We don’t like society the way it is. We are going to radically change it”—and make it much worse for the majority of people.
On the issue of knife crime, my Green Party colleague Caroline Russell, who is a member of the London Assembly, has repeatedly asked the police to stop posting pictures of knives on social media, because it makes things worse. The evidence says that young  people feel more at risk and that it encourages them to carry knives. There are other measures that the police can use to reduce knife crime. We have to show young people that it is safer for them not to carry a knife.
All in all, I have two questions for the Minister. First, do this Government have absolutely no respect for this House and for democracy? My second and much smaller point is: why on earth are the Government doing this before the pilots are finished? Surely the pilots should show us the way forward. The Government seem very confused about what pilots are for. Why promise a pilot and then go ahead and introduce these measures anyway? I am Disgusted of Lambeth.

Lord Moylan: My Lords, since the noble Baroness, Lady Jones of Moulsecoomb, spent much of last year calling the Prime Minister of the day a liar on the Floor of your Lordships’ House, I am surprised that she has only just now lost her trust in the Government. That was not my principal point in rising to speak; my point was to express a degree of support for the noble Lord, Lord Paddick. As he at least might recall, when we debated the insertion of serious violence reduction orders in the Sentencing Code during the passage of the then Police, Crime, Sentencing and Courts Bill last year, I expressed considerable concern about those orders. Indeed, I recall that in Committee I added my name to the amendment in the name of the noble Baroness, Lady Meacher, which raised these issues, principally on the grounds that I am extremely concerned by the increasing use of preventive justice, so to speak, by the Home Office and by police forces empowered by the Home Office, rather than taking coercive action on the basis of proven criminality or wrongdoing.
I have considerable sympathy with the noble Lord, Lord Paddick, but since we lost that point and the serious violence reduction orders were inserted in the Bill, it is right that the Government should carry out trials before they are extended throughout the whole country. I understand his point, but what is striking to me is that my noble friend the Minister has so far given no indication of what the tests are by which these trials are going to be assessed once they have been completed. What is success going to look like? What would persuade the Government to make amendments or changes or to drop the whole approach if we saw those results emerging from the trials? I hope my noble friend will be able to say something about that when he rises to respond to this short debate.
While I am on my feet, I say that Sections 60 and 61 of the same measure—the Police, Crime, Sentencing and Courts Act of last year—empowered the Home Secretary to issue statutory guidance to police forces on the enforcement of what are referred to as “non-crime hate incidents”. This has so far not appeared, despite the fact that my noble friend the Minister very kindly wrote to me last October saying that the Government hoped to table the new statutory guidance before Christmas, or at least before the end of 2022.
When the Minister responds, would he be able to give us a date by which he expects the Home Secretary to put the draft statutory instrument before Parliament, so that we can debate it and get some parliamentary grip on this contentious but very important area of criminal justice?

Lord Hogan-Howe: My Lords, I support broadly targeting those convicted of carrying knives, because it seems to follow the evidence we have. Repeat offenders, repeat locations and repeat victims often disproportionately contribute to the amount of crime, particularly with people who carry knives. Not everybody who is violent carries knives, but those who do repeatedly carry them, so it is not a bad idea to target them. In fact, the obverse of what is being said about without-cause stop/search is that this gives a reason to stop/search—namely, that the person has been convicted in a court of carrying a knife or being associated with somebody carrying a knife.
As the noble Lord, Lord Paddick, mentioned, the Police Federation of England and Wales objected to this proposal, or at least made some arguments counter to it. I am quite surprised by that, because the arguments it makes are also against Section 60 stop/searches. Section 60 orders are put in place in a certain area to target repeat locations and allow stop/searches to be carried out without cause. A similar dilemma is that nobody knows where these areas are until a police officer stops you and says you are in one, which has always for me been a reason why we should have better ways of communicating those areas to people who may be stopped in them. However, the principle of without-cause stop/search has been there for a long time.
I agree with the noble Lord, Lord Paddick, that this is not the answer, but I think it is part of an answer. It seems reasonable to target those who repeatedly carry knives or are likely to carry knives, having been warned by a court that they should not. They have been given an order and told not to, so it is reasonable to check whether they are keeping to that order.
I am not in a position to comment on the comments from the noble Lord, Lord Paddick, or the noble Baroness, Lady Jones, on whether a promise was made about how this power would be extended, but I imagine that one of the challenges will be with those areas adjacent to the four pilot areas—where the line is drawn on a map according to 1974 local government boundaries and often county boundaries. People who wander between villages across a county line cannot be policed on the other side of it if they have an order in place elsewhere, such as in the place where they live—let us say they are in a village just on the other side of a court boundary. It would be an odd conclusion that the adjacent forces to Sussex, West Midlands, Thames Valley and Merseyside would not be able to police these orders and that, in principle, people could wander over the border, carry a knife and not suffer the same consequences.
I agree that identification is important. Officers should be able to identify the people who have these orders. If they stop them and say, “Who are you?”, they indicate that they do not know the person has an order, but there are ways around that. Markers for ground vehicles can be put on the police national computer. Specific intelligence can be shared if people are wandering between, say, various nightclubs or areas, so that local officers know who they are. That can be managed.
My final point is that I was a little surprised by the selection of the pilot areas and that London was excluded. My experience, having policed in South Yorkshire, Merseyside and London, is that where stop/search has been a problem—and it has been—that has often been in London. Frankly, in the rest of the country, the volume is low and the problem is not of the same nature. If you talk to anybody in Merseyside or South Yorkshire, you just do not hear that this is a particular problem. I am not saying that it is not a problem, but it is not of the order that we see in London.
London has seen the sus laws of the 1960s and Section 44 of the Terrorism Act in the 1970s, 1980s and 1990s, and now Section 60 carries its own problems. When I took over in 2011, we discovered that Section 60 orders had, I am afraid, been scattered like confetti around London and something needed to be done. London’s experience of stop/search has been of stop/search without cause, but it is completely different from the rest of the country, so I wonder how much we can take from the experiments in Merseyside, West Midlands, Thames Valley and Sussex that could carry over easily to the London environment. People may not be persuaded by that. That is something the Government might want to consider as the pilots progress; if London is excluded, the evidence may not be as powerful in future.

Lord Coaker: My Lords, I start by thanking the noble Lord, Lord Paddick, who made some important and interesting points. I agree with many of them and I look forward to the Minister’s response.
The Chamber will wish to know that we did not oppose the Motion for this pilot in the other place, but there are also important points that I wish to pose to the Minister to add to those made by the noble Lords, Lord Paddick, Lord Moylan and Lord Hogan-Howe, and the noble Baroness, Lady Jones. I also thank the noble Lord, Lord Paddick, in another sense, in that this also gives us in this Chamber the opportunity to discuss knife crime, which is clearly an important matter.
We are all horrified by knife crime and the horrific murders, sometimes of young people by other young people, in the most shocking of circumstances—in full public view. Can the Minister start by telling us what the latest figures actually tell us with respect to knife crime? I looked for them before this debate, and some are impacted by the pandemic or use different years as a baseline. What are the actual official figures for knife crime and knife-related murder, and not just in London but across the country? Clearly, whatever the figures are, they are too high, and the fundamental question for this debate is how serious violence reduction orders are expected to help. The noble Lord, Lord Moylan, made the point that knife crime prevention orders were backed as the answer to tackle knife crime back in 2019. They have not even started yet. Why is that, and when will they start?
On the issue of disproportionality, the pilot is for two years. However, supposing that problems emerge around disproportionality before the two years—a point the noble Baroness, Lady Jones, made—is there a mechanism for an earlier review within that two-year period to look at data as it emerges? The Minister in the other place says he is open to this. What does that  mean: an interim review after, say, six months, or a year? What does the Government being “open to looking at this” mean?
Can the Minister explain the transition period of six months and how that will work in practice? In particular, how will it impact on an individual given such an order as regards its length? Are all orders for only a six-month duration or just those issued on the last day of the two-year pilot, hence the six-month transition period? It is not clear to me at all, because if you are given an SVRO on the last day of the two years, it can last only for a maximum of six months. If you are given it on the first day of the two-year period, can you be given it for two years, or two years and six months, or can you be given it for six months, then another six months and another six months? Some clarity about who can and cannot be given SVROs is needed.
On the issue of territorial extent, the SVROs will be able to be used only in the four areas—the noble Lord, Lord Hogan-Howe, made a good point about how the areas were chosen, why certain other areas were not and why the number four was alighted on, and I think the Chamber could do with some explanation of that from the Government. These four areas are the areas where the orders can be given but, as the noble Lord, Lord Paddick, mentioned, the concern is that the police power will be applied across England and Wales. How will the data be shared by these four areas with forces across the country? What about Scotland? If somebody who is subject to such an order went to Scotland, what happens with respect to that? How will a police officer be able to know that the individual is subject to an order? Again, the noble Lord, Lord Hogan- Howe, made that point, although I understand that his point was that you would expect it to be on the police database and shared in that way. However, it would be interesting to see how that will work and what the Government’s response would be.
In other debates, we have talked about stop and search, including whether only a uniformed officer can use this power; again, the noble Lord, Lord Paddick, has made this point forcefully before. With respect to this order, can only a uniformed officer use this stop and search power—particularly given that, as noble Lords will appreciate, it is stop and search that can be done without suspicion? How many officers have now received the College of Policing training on stop and search, and will they be updated with respect to this order?
On the question of pilots, can the Minister look at ensuring that, if, for whatever reason, a future pilot contains one part that is focused on a small number of areas and another part that is to be applied nationally, this is clearly explained—particularly in this case where, as the noble Baroness, Lady Jones, and the noble Lord, Lord Paddick, have pointed out, this pilot came about as a result of a concession made by the Government because of the concerns about serious violence reduction orders raised by many noble Lords?
Can the Minister say something to inform us how this pilot will be evaluated by Ecorys? How is it going to do that? What criteria is it going to use to determine whether this pilot has been successful? Will it be fully independent of government? Also, are the Government open to the fact that these pilots may fail and not  work? In those circumstances, would the Government be prepared to say that they will not carry on with them? The evaluation is particularly important given the concerns around disproportionality with respect to gender and ethnicity. If the evaluation shows that there are problems, the Government should consider other measures.
We all want to tackle knife crime, whatever its level; there is no difference between us on that. There are real issues for us as a society to deal with, as the Minister in the other place said. I want to point out one statistic that the Minister in the other place used so that noble Lords can see how difficult this is, whatever the level of knife crime. He said that
“young black people are 24 times more likely to be murdered using a knife than those from other communities.”—[Official Report, Commons, Ninth Delegated Legislation Committee, 13/12/22; col. 8.]
We all want something to be done about that. We all accept that that figure is too high. The issue for the Government is how on earth knife crime prevention orders are going to tackle that and other issues related to knife crime across the country. Can the Minister say what else the Government are doing to tackle this problem?
We have this new order alongside other orders designed to tackle knife crime and serious violence. We all hope that they work. However, as the noble Lord, Lord Paddick, and others pointed out, targeting hot spots, having police on the streets in neighbourhoods, prevention, community engagement and support are also crucial. Many lives, often very young ones, are still being lost. Many families are still affected. Many communities are still affected. Orders such as this one may help, but they must be part of a wider ongoing effort by the police and communities if they are to have the impact that we all want.

Lord Sharpe of Epsom: My Lords, I am grateful to all noble Lords who have made valuable contributions to this debate.
First, I will address the concerns expressed by the noble Lord, Lord Paddick, in relation to the territorial extent of the SVRO pilot. I want to clarify that, as I said earlier, SVROs are being introduced on the basis of a pilot in Merseyside, West Midlands, Sussex and Thames Valley police forces. They will be issued only in these four pilot police force areas. However, as the revised PACE Code A sets out, the stop and search powers are enforceable by all constables across England and Wales; the “all constables” point answers the question of whether they will be in uniform, I think, but obviously they would have to identify themselves as such. This is aimed at supporting an operational response across police force areas, allowing constables from non-pilot forces to stop and search individuals subject to SVROs if they travel outside of the pilot area.
The noble Lords, Lord Hogan-Howe and Lord Coaker, asked why we are piloting in those force areas and not with larger forces, where the prevalence of serious violence—

Lord Coaker: I am sorry to interrupt; I apologise to the Minister for being rude. I am not clear what he means about whether or not an officer using this stop and search power must be in uniform. This is an  extremely important point. I am sorry if it is just me and I did not understand, but I wonder whether the Minister can clarify that point.

Lord Sharpe of Epsom: That is no problem at all. I will do my best to clarify that by the end of this speech, but as I understand it, it is all constables, which I assume includes those who do not necessarily wear a uniform.
Regarding the territorial extent of the pilot and why we are piloting in these force areas and not larger ones, where the prevalence of serious violence is higher, all four forces that will pilot SVROs are in the 20 areas most affected by serious violence across England and Wales. They accounted for 80% of all hospital admissions for injury with a sharp object, with each individually accounting for 2% or more of admissions, rounded to the nearest percentage point. The West Midlands has the third-highest rate of knife crime in England and Wales, and Merseyside the sixth-highest. The pilot will allow us to build an understanding of the impact and effectiveness of the new orders before deciding whether they should be rolled out nationally to other force areas. I hope that answers the question.
I have heard what the noble Lord, Lord Paddick, had to say on this topic; however, stop and search powers are not enforceable across England and Wales. As the noble Lord, Lord Hogan-Howe, noted, individuals subject to SVROs could simply operate outside the pilot areas. The Government held a statutory consultation on the revised code. This issue was discussed at length with key stakeholders, who strongly supported allowing the use of stop and search powers by police constables both within and outside the police force areas. In answer to the question asked by the noble Lord, Lord Paddick, about the Police Federation, it is a member of the PACE board and as such was invited to provide a response. Whether it did, I do not know. Like the proposed approach to SVROs, knife crime prevention orders, which have been referred to, are being piloted in the Metropolitan Police area and can only be issued in that force area. However, the orders are also enforceable across England and Wales.
I stress that this is only a pilot, but we are revising the PACE codes because they outline the fundamental principles of fair and responsible stop and search. We want to ensure that officers have clear guidance on the use of the new powers in the SVRO pilot, including through PACE codes of practice. The search power can only be used against persons who are subject to an SVRO. An individual can be issued with an SVRO only if they are over 18 and have been convicted of an offence involving a bladed article or an offensive weapon, and if the court considers it necessary to make the SVRO to protect the public from the risk of harm involving an offensive weapon or bladed article, or to prevent the offender from further offending involving an offensive weapon or bladed article. Therefore, while the police do not require reasonable grounds for suspicion, it is not an unrestricted stop and search power. The code of practice is clear that the use of the power must not be based on prejudice. The use of the power is discretionary, and officers will be expected to use their judgment when choosing to conduct searches.
The noble Lord, Lord Paddick, asked how, if individuals are not legally required to give their identity when stopped by the police, officers will identify those subject to an SVRO. The police will have obtained the offender’s details at the notification stage of an SVRO—there is the requirement for an individual subject of an SVRO to notify the police of their name and address—and they should ensure that any stop and search under the power is targeted at offenders that have a SVRO only. In most cases, it is expected that offenders subject to an SVRO will be known to the police and officers will be able to identify the offender before conducting a search. Where an officer is unsure of an offender’s identity, they should seek to confirm that offender’s identity and whether they have an SVRO before using the stop and search power. It is an offence for an offender to tell a police constable that they are not subject to an SVRO if they are.
The Government fully support the police in the fair use of stop and search to crack down on violent crime and protect communities. The code of practice is one of many safeguards in place to ensure the fair and proportionate use of SVROs. Others include statutory guidance for the police on the use of the power, which we have laid in draft before Parliament, body-worn video, and extensive data collection. Stop and searches carried out using the SVRO power will be subject to the usual internal and external scrutiny panels to ensure that forces are continually reviewing and learning from officer stop and searches.
The noble Lord, Lord Coaker, and my noble friend Lord Moylan asked about the evaluation of the pilot. We of course recognise the need for transparency in how the orders are used, and clear and robust monitoring to reassure communities that the orders are being used appropriately and effectively. The Government are piloting SVROs to build an understanding of their impact before deciding whether they should be rolled out nationally. By definition, that implies that if they do not work and we do not get sufficient data, they will not be continued with.
We have appointed an independent evaluator, Ecorys, to carefully gather the data necessary to assess the impact of these orders. We will lay a report on the outcome of the pilot in Parliament. It is expected in late 2025 and will include an initial assessment of the impact of SVROs on the reoffending rates of offenders in respect of whom such orders have been made; include information about the exercise by constables of the powers; provide an assessment of the impact on offenders of being subject to an SVRO; and assess the impact of SVROs on people with protected characteristics within the meaning of the Equality Act 2010. We are also working with the SVRO working group and the National Police Chiefs’ Council to ensure that all forces are aware of the draft statutory guidance on SVROs and the revised PACE Code A.
The noble Lord, Lord Paddick, asked me about training. I do not think it is for me to discuss operational matters particularly, but the training is being worked on by the College of Policing. It will be interactive e-learning training and will ensure that officers in pilot areas understand the new civil orders, their responsibilities and the stop and search powers being provided. This learning platform will test officer knowledge, including when it would or would not be appropriate to use the powers.
To sum up, we do not accept that the availability of the stop and search powers across England and Wales for individuals subject to an SVRO warrants the amendment tabled by the noble Lord, Lord Paddick. The rationale behind the approach we are taking is clear and sensible, and there are strong safeguards in place. Ultimately, we have a responsibility to tackle crime and keep people safe, and that is and will continue to be a key priority for the Government.
I welcome the fact that the noble Lord, Lord Coaker, mentioned victims; I will go into some detail on the statistics. The latest police-recorded crime figures published by the ONS for the year ending June 2022 show that knife-enabled crime remained 9% lower—that is, 49,991 offences—than pre-coronavirus pandemic levels; in the year ending March 2020, the figure was 55,076. Police-recorded offences of possession of an article with a blade or point were 9% higher in the year ending June 2022, at 25,287 offences, than the year ending March 2020, when there were 23,242 offences. That is a 13% increase. The police recorded 679 homicide offences in the year ending June 2022, which is a 5% decrease compared with the year ending March 2020. Levels have increased by 13% since the year ending June 2021, during which social restrictions were still in place.
I understand the concerns around disproportionality and the impact of stop and search, particularly on black individuals. But, as the noble Lord, Lord Coaker, has just mentioned, we should not forget that, according to the most recent studies, young black people are 24 times more likely to be victims of homicide than young white people. That is a tragedy. Young people are dying, their families are suffering and their communities are being disproportionately impacted. I totally agree with the noble Lord, Lord Coaker: we absolutely have to do better. I go back to the point I made earlier: to be absolutely clear, an individual must have been convicted of an offence where a bladed article or offensive weapon was used or was present to receive an SVRO, and the stop and search power applies only where an individual has an SVRO.
I will read out a supportive quote from Patrick Green, CEO of the Ben Kinsella Trust. As a reminder, Ben was knifed to death at the age of 16 in 2008; he would now have been entering his 31st year. Patrick said:
“We are pleased that the Government is setting out to do more to take knives and those who choose to persistently carry them off our streets. Reoffending rates have been one of the scourges of knife crime. SVROs give us a chance to look again at stop and search and what more can be done in the courts to reduce offending.”
That very powerful statement speaks for itself.
The policy detail of SVROs was discussed at length during passage of the Police, Crime, Sentencing and Courts Act 2022. As mentioned, they will be piloted and we will conduct a full evaluation before any further rollout.
My noble friend Lord Moylan went slightly off topic when he asked me about non-crime hate incidents. I will endeavour to answer. The Home Secretary has asked officials to consider the issue of NCHI recording to ensure that the police are using their time most effectively. This work is currently under way and includes  consideration of whether the Home Secretary will publish a code of practice on non-crime hate incident recording, as provided for in Sections 60 and 61 of the Police, Crime, Sentencing and Courts Act.
In closing, I offer again my thanks to all noble Lords who contributed to this short debate. I hope that I have covered the points raised during it. There is one that I have not: I will write to the noble Lord, Lord Coaker, on the subject of uniforms; I cannot clarify that at this precise moment. I hope the House will feel sufficiently reassured that the changes we are making to PACE Code A are a necessary safeguard to have in place before commencement of the pilot scheme for SVROs. I have made it clear that public safety is our foremost concern. I therefore commend the order to the House.

Baroness Jones of Moulsecoomb: My Lords, before the Minister sits down, I did not hear an answer to my two questions. I do not expect one as to whether the Government respect democracy because I know the answer to that, but my other question was about the pilot scheme. Why promise a pilot and then do the whole rollout?

Lord Sharpe of Epsom: I am not entirely sure that I understand the noble Baroness’s question. If you are going to have a pilot you have to roll it out, surely.

Baroness Jones of Moulsecoomb: Why not wait for the pilot to finish before you decide to roll out the whole thing more widely?

Lord Sharpe of Epsom: We have not actually started the pilot and we are not rolling it out. It is stuck to four pilot areas. We are talking about the territorial extent of the stop and search powers.

Lord Paddick: I am very grateful to all noble Lords for their contributions to the debate, particularly those who supported my amendment.
The Minister has completely glossed over the whole point of the regret amendment, which is that a concession was made by a government Minister at the Dispatch Box to limit SVROs to specific police areas. There was no mention of restricting only the issuing of SVROs, rather than their enforcement, at that time. It was never even considered, let alone agreed to. What has happened is this. The Home Office has consulted the police—what the Government called “key stakeholders”; I think the Minister means the police, as that is who they consulted—and the police said, “Hang on a minute, we need the power across all of England and Wales because these criminals travel”. That may or may not be a valid argument, but it was not what the Minister promised from the Dispatch Box. That is the point and that is why there is a regret amendment, but I do not intend to delay the House further because there is a big debate to come. I therefore wish to withdraw the amendment.
Amendment to the Motion withdrawn.
Motion agreed.

Financial Services and Markets Bill
 - Second Reading

Baroness Penn: Moved by Baroness Penn
That the Bill be now read a second time.

Baroness Penn: My Lords, this Bill is a landmark piece of legislation—the most ambitious reform of our financial services regulatory framework in over 20 years. Perhaps it is a signal of the significance of this legislation that we have the pleasure of three maiden speeches during this debate. I welcome my noble friends Lady Lawlor, Lord Remnant and Lord Ashcombe to the House. I very much look forward to hearing their contributions.
I also pay tribute to the former Chancellor and Financial Secretary to the Treasury, my noble friend Lord Lawson, who has recently retired, having served Parliament in both Chambers for nearly half a century. While serving as Chancellor he transformed the tax system, unleashed the City and revolutionised the approach to macroeconomic policy, setting the economy on the path of growth. His voice, reason and perspective will be sorely missed in this Chamber, and I thank him for all his service.
The Bill represents the platform upon which much of this Government’s vision for financial services will be delivered—a vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens, creating jobs, supporting businesses and powering growth across all four nations of the United Kingdom.
Effective, efficient and easily accessible financial services are a foundation for people’s everyday lives and the bedrock upon which our economy is built. They also make their own direct contribution to our economic growth, with financial and related professional services employing more than 2.3 million people across the UK and, in 2020, contributing nearly £100 billion in taxes. In recent decades, the UK has become a leading global centre for financial services and, as the Chancellor highlighted in the Autumn Statement, the sector is one of the UK’s five key areas of growth for the future. Our exit from the EU creates the opportunity to ensure that continues by implementing a more agile and internationally competitive set of rules, better tailored to the UK market, while ensuring the sector remains well-regulated and effectively supervised.
The Bill has five overarching aims. First, it implements the outcomes of the future regulatory framework review. Secondly, it bolsters the competitiveness of UK markets and promotes the effective use of capital. Thirdly, it takes steps to make the UK an even more open and global financial hub. Fourthly, it harnesses the opportunities of innovative technologies, enabling their safe adoption in the UK. Lastly, but by no means least, it promotes financial inclusion and enhances consumer protection.
I turn to the first aim, to implement the future regulatory framework or FRS review. Clause 1 revokes retained EU law for financial services so that it can be replaced with a coherent, agile and internationally respected approach to regulation that has been designed  specifically for the UK. This approach builds on the existing model established by the Financial Services and Markets Act 2000 which empowers our independent regulators to set the detailed rules that apply to firms operating within the framework set by the Government and Parliament. The Government consulted extensively on how the UK’s approach to financial services regulation should be adapted following EU exit, and there was widespread support for the approach taken in this Bill. Schedule 1 contains more than 200 instruments that will be repealed directly by the Bill. These instruments will cease to have effect when the Treasury and the regulators have put into place the necessary secondary legislation or regulator rules to replace them as appropriate.
It is important for the House to recognise that putting this into effect will require a significant programme of secondary legislation to modify and restate retained EU law. As part of the Edinburgh reforms announced on 9 December the Treasury published Building a Smarter Financial Services Framework for the UK, which set out how the Treasury intends to use these powers. Alongside this we published several illustrative draft statutory instruments demonstrating how the powers in the Bill can be used to replace retained EU law.
As the regulators take on greater responsibility for setting rules following the repeal of retained EU law, the Bill makes changes to the regulators’ objectives to ensure that they consider the sector’s critical role in supporting the UK economy. For the first time the Prudential Regulation Authority and the Financial Conduct Authority will be given new secondary objectives to facilitate the international competitiveness of the UK economy and its growth in the medium and long term. The status as a secondary objective strikes the right balance and sets a clear hierarchy by ensuring that the FCA and the PRA must work to advance growth and competitiveness while maintaining their focus on their existing objectives.
The Bill also ensures that the regulatory principles of the financial services regulators require them to have regard to the UK’s statutory net-zero emissions target. This will embed consideration of the climate target across the breadth of financial services regulators’ rule-making and cements the Government’s long-term commitment to transform the UK economy in line with their net-zero strategy and vision.
It is also imperative that the regulators’ new responsibilities are balanced with clear accountability to the Government and Parliament. I assure noble Lords that the Government recognise the importance of parliamentary scrutiny of the work of the Treasury and the regulators. There are already a number of provisions in this regard, and the Bill makes further provision to support Parliament in carrying out this important role. It introduces new requirements for the regulators to notify the Treasury Select Committee of a consultation and for the regulators to respond in writing to responses to any statutory consultations from any parliamentary committee. In addition, the regulators will need to be transparent about all respondents to a consultation, subject to their consent. These measures were strongly informed by the views of this House, as expressed during the passage of the Financial Services Act 2021. The Bill also gives the Treasury the power to  require the financial services regulators—or, where appropriate, an independent person—to review their rules where it is in the public interest.
I turn now to the Bill’s second aim of bolstering the competitiveness of UK markets and promoting the effective use of capital. The measures in Schedule 2 make important changes to the MiFID framework, which regulates secondary capital markets. They do away with burdensome rules such as the double volume cap and share trading obligation while maintaining high standards and protecting the smooth functioning of markets. High regulatory standards are an essential element of competitiveness in UK markets, and the Bill introduces a senior managers and certification regime for key financial market infrastructure firms, ensuring high standards of governance in these systemically important firms. The Bill also expands the resolution regime for central counterparties to align with international standards and enhances powers to manage insurers in financial distress.
The Bill’s third aim is to strengthen the UK’s leadership as an open and global financial centre. The UK is now able to negotiate its own international agreements, and the Government are currently negotiating an ambitious financial services mutual recognition agreement, or MRA, with Switzerland. While the MRA itself will be scrutinised under the procedures in the Constitutional Reform and Governance Act 2010, Clause 23 enables the Treasury to amend existing legislation to give effect to this and any future financial services MRAs once finalised. Schedule 2 will enable the UK to recognise overseas jurisdictions that have the equivalent regulatory systems for securitisations classed as simple, transparent and standardised, or STS, providing more choice for UK investors.
As its fourth aim, the Bill takes steps to ensure that the regulatory framework facilitates the adoption of cutting-edge technologies in financial services. Clauses 21 and 22 and Schedule 6 extend existing payments legislation to include payment systems and service providers that use digital settlement assets, including forms of crypto assets used for payments, such as stablecoin backed by fiat currency. This brings such payment systems within the regulatory remits of the Bank of England and the Payment Systems Regulator. Clauses 65 and 8 clarify that the Treasury has the necessary powers to regulate crypto asset activities within the existing financial services framework, as extended by this Bill. To foster innovation, Clauses 13 to 17 and Schedule 4 enable the delivery of financial market infrastructure sandboxes, allowing firms to test the use of new and potentially transformative technologies and practices in the infra- structures that underpin financial markets.
The Bill’s final aim is promoting financial inclusion and consumer protection. The Government are committed to fostering a financial services sector that supports everyone, with appropriate consumer protections and measures to ensure that no one is left behind by the rapid advancement in financial technology. There is an extensive programme of work ongoing related to consumer protection, particularly in areas raised by noble Lords during the passage of the Financial Services Act 2021 such as buy now, pay later and the FCA’s new consumer duty. That Act also made legislative  changes to support the widespread offering of cashback without purchase in shops and other businesses, following a proposal by my noble friend Lord Holmes of Richmond.
Clause 51 and Schedule 8 of this Bill go further and give the FCA responsibility for seeking to ensure reasonable access to cash across the UK. The Treasury will designate banks, building societies and operators of cash access co-ordination arrangements to be subject to FCA oversight on this matter. Clause 52 and Schedule 9 give the Bank of England new powers to oversee the wholesale cash infrastructure to ensure its ongoing effectiveness, resilience and sustainability.
Finally, the credit union sector plays a crucial role in providing access to affordable credit to its members. Clause 69 will allow credit unions in Great Britain to offer a wider range of products and services to their members. The Bill also strengthens the rules around financial promotions, requiring all authorised firms to undergo a new FCA assessment before they can approve financial promotions by unauthorised firms. This will reduce the risk of consumer harm. Additionally, Clause 68 enables the Payment Systems Regulator to mandate the reimbursement of victims of authorised push payment scams by payment providers for all payment systems it regulates. It also places a duty on the PSR to mandate reimbursement in relation to the Faster Payments system specifically.
This is a substantive Bill; in opening this Second Reading debate I have been able to touch only briefly on many of its main measures. I have no doubt that, when we enter Committee, noble Lords will subject the Bill to the level of scrutiny that it deserves.
As I conclude, I think it is worth reflecting on the journey that we have taken to the production of the Bill. It is the result of several years of consultation with industry, regulators and the public. The Government first consulted on the future regulatory review in October 2020, with a further consultation in November 2021 setting out detailed proposals for reform. It will enable a programme of essential reforms that will help drive our economy, including reforms to Solvency II and the prospectus regime and changes resulting from the wholesale markets review. So, as we conduct the important work of scrutinising this Bill, I hope that the Government’s broad approach will draw support from across the House and that many noble Lords share the Government’s ambition to ensure that the UK’s financial services continue to be an engine of growth for our economy. I beg to move.

Lord Hunt of Kings Heath: My Lords, it is a great pleasure to open the Back-Bench debate by thanking the Minister for her opening address and, like her, welcoming the maiden speeches of the noble Lords, Lord Remnant and Lord Ashcombe, and the noble Baroness, Lady Lawlor. I reassure the Minister that I support the Bill and the intent to modernise our financial services and ensure that the City retains its competitiveness in a global marketplace. However, this has to be done in parallel with measures to promote financial stability, inclusion and consumer protection as well as—I hope—recommitting the Government to making the City the first net-zero aligned financial centre.
Like the Minister, I can concentrate on only three or four aspects of this. First, I want to talk about financial inclusion. How is the Government to address the poverty premium—the extra costs that poorer people pay for essential services such as insurance, loans or credit cards? This is closely linked to the ease of access to cash and banking services, to which the Minister referred. The fact is that the Bill does nothing to protect essential face-to-face banking services, which the most vulnerable in our society depend on for financial advice and support.
Indeed, on this Government’s watch, almost 6,000 bank branches have closed since 2015, yet there is a significant overlap between those reliant on cash—estimated at about 10 million people—and those who need in-person bank support. Those without the digital skills to bank online, people with poor internet connections and people who are unable to afford wi-fi are at risk of being left behind.
The Government have committed to protecting access to cash, but will free access be protected? The key to this is ensuring that the ATM network is sufficiently funded by the interchange fee. Since 2018, this funding has seen successive real-term cuts, which is risking the closure or the conversion of an estimated 37,000 free-to-use ATMs. I believe that the regulator must be mandated to consider the funding of ATMs through legislation in this Bill.
I hope that we will do more to protect people from the buy now, pay later industry. We know that many millions of people are borrowing to pay their mortgages, and to put food on their table and clothes on their children’s backs. A quarter of all buy now, pay later users have been unable to pay for at least one essential item because they are having to make repayments on buy now, pay later products. Many did not realise what they were getting themselves into because buy now, pay later is currently so pervasive on websites. Users have nobody to complain to; they cannot go to the ombudsman if they feel they have been mis-sold this type of credit. I understand that the Government have accepted proposals to regulate, yet regulation has not come. Why is that, and why cannot this Bill be the vehicle?
I turn now to financial fraud. The Bill offers protection for victims of authorised push payment scams but little to address the growing problem of financial fraud. According to the latest figures from the NAO, 41% of all crime against individuals in the year ending June 2022—with an estimated 3.8 million incidents—was actual or attempted fraud. Yet, the number of fraud offences resulting in a charge or summons is pathetic. In the year ending March 2022, 4,816 fraud cases resulted in a charge or summons. Moreover, less than 1% of police personnel were involved in rendering fraud investigations in the year ending March 2020.
I am particularly concerned about the impact on older people. As Hourglass has pointed out, suffering economic abuse as an older person can have really life-changing effects leading to trauma, mental health problems and, in some cases, death. I do not understand why the Government continue to fail to take fraud seriously and why we cannot see a fully fledged fraud strategy. Again, this Bill provides an excellent vehicle for us to ensure that that happens.
Finally, one other area where the Bill could have done so much more is in relation to cryptocurrency. Recent events following the collapse of FTX have shown the risks in the Government’s aim to make the UK a global hub for cryptocurrency assets. It is true that the Bill contains measures to bring stablecoins into the scope of regulation, but surely they could be doing much more. I say to the Minister: overall, the Bill is welcome but it is certainly ripe for improvement.

Lord Sharkey: My Lords, we welcome the overall objectives of the Bill but have some significant reservations. In the absurd five minutes allowed, I will focus on the reservations rather than the merits of the Bill.
We have very serious reservations about the wholesale bypassing of parliamentary scrutiny that the Bill could bring about. We are sceptical about the merit of the proposed new growth and competitiveness objectives. We are concerned about the extension of the SMCR, and disappointed by the imbalance in the Bill between regulatory modifications in the interests of the financial services sector and measures to protect the interests of consumers.
Schedule 1 sets out what retained EU law is to be revoked, modified or replaced. I counted at least 250 items. Some will be subject to the negative SI procedure, some to the affirmative SI procedure and some to no parliamentary procedure at all. What all this means is that this wholesale transposition, modification, repeal and replacement exercise is not subject to any meaningful parliamentary scrutiny. We need to find a way of allowing the relevant Select Committees to initiate proper inquiries into the drafts of proposed changes that they see as important and have this done before any instruments are laid before Parliament or changes are made without reference to Parliament. Parliament should not be used as a kind of consultee. The structure of our financial services regime is far too important to be left to the Treasury and the regulators alone.
I turn to Clause 24 and to the proposed addition, as a secondary objective, of growth and competitiveness to the existing FCA and PRA objectives. There does not seem to be much in the way of compelling evidence for this. In fact, much of the evidence and testimony points in the other direction. This has all been tried before. Many commentators laid a part of the blame for the 2008 crash on these objectives; that is why we repealed them in 2012. Andrew Bailey said then that it did not work out well
“for anyone including the FSA.”
Writing in the Financial Times a month ago, Sir John Vickers, who was the fons et origo of some of this, concluded:
“For the UK economy, it would be best to reject this addition to regulators’ objectives.”
Over 50 economists and policy experts wrote to the Government in May with similar misgivings; so did Which? and, tellingly, so did the FCA’s own consumer panel. We will return to the issue in Committee.
The next area I want to touch on is the extension of the SMCR. The proposal is to extend, mutatis mutandis, the existing regime to FMIs—a good idea if the current  SMCR had worked, but it has not. The current version of the SMCR has not produced the results intended or envisaged. In fact, I can recall only a single case of a truly senior manager being held to account: that was the egregious Jes Staley at Barclays. This is not because the financial services sector has forsworn misbehaviour. We will want to return to this issue in Committee.
I now turn to measures to protect consumers. The last time we discussed imposing a duty of care, it was agreed that the FCA would examine the case. The FCA has decided that preferable to a duty of care was a new set of rules for firms’ behaviour called the new consumer duty. This consumer duty is due to come into effect at the end of July, a year after the final rules were published in a 90-page paper, helped by a 114-page guidance note. Not only is this extremely complex and yet another very heavy burden on firms, but it is very unclear that the new duty is superior in any way to a simple duty of care. Critically, it omits private right of action provisions. We will bring forward amendments to replace this consumer duty with a duty of care and a private right of action. We will also bring forward amendments to extend the FCA’s perimeter to cover lending to SMEs, which have suffered at the hands of predatory and unscrupulous lenders.
We will bring forward an amendment to relieve the plight of the mortgage prisoners. These are people who, in the collapse of 2008, had their mortgages acquired by the Treasury and then sold on to various inactive lenders and American vulture funds. Since then, these people have been trapped on very high SVRs. This is entirely the Treasury’s fault. It has caused and still causes immense suffering to many thousands of families. We will try to put that right.

Lord Vaux of Harrowden: My Lords, I first draw attention to my interest in the register as a shareholder of Fidelity National Information Services, which owns Worldpay. Like others, I generally support what this Bill is trying to achieve. There is much that is good here, but there are areas for improvement. It is a pleasure to follow the noble Lord, Lord Sharkey, who chaired the EU Financial Affairs Sub-committee of this House, which I sat on. In its last publication before it was wound up following Brexit, that sub-committee stated that
“Delegating more powers to the financial regulators will require increased parliamentary oversight of their activities”.
It suggested that
“This might require a change in the way that parliamentary committees are structured and an increase in resources to enable effective scrutiny”.
While the Bill gives strong rights of oversight and direction to the Treasury, it does very little to provide increased parliamentary oversight. Frankly, informing the Treasury Select Committee of consultations does not really cut the mustard, nor are the performance reporting requirements strong enough. Treasury oversight and parliamentary scrutiny are not the same thing. Our financial services industry is so important and its regulation so complex that I continue to believe that this House—possibly jointly—should create a committee  specifically for this purpose and to provide the systematic scrutiny of the decisions, actions, policy-framing and impact of the financial services regulators and of HM Treasury. Financial services regulation is too big a topic to be a part of a wider committee such as our existing Industry and Regulators Committee; it needs dedicated coverage.
Importantly, the systematic scrutiny should be forward-looking. Historically, the regulators have tended to be too reactive after the event and have not done enough to identify future risks. Most of the financial scandals of recent years were foreseeable—indeed they were foreseen by some. I do not see anything in this Bill that will improve that.
I welcome the secondary objective to support growth and international competitiveness. Our financial services industry is such an important part of our economy that it must not be held back by overzealous regulation. It is not possible or even desirable to eliminate all risk. I do not understand, though, why the net-zero objective should not be given equal importance. It is welcome that the regulators should “have regard” to net zero, but I would be keen to hear from the Minister what the practical difference is between a secondary objective and a “have regard” requirement, and why net zero should not have equal billing to growth, given that the Government agree about its fundamental importance to our future. I do not believe that the two are incompatible.
I welcome the introduction of the sandbox rules, which should enable innovation. I have one question: when rules are disapplied for this purpose, who will be liable for any losses suffered if things go wrong? Consumers should not bear that risk.
I am pleased that crypto assets are at last being brought into the regulatory environment, although in a small way—only stablecoin when used as a means of payment. The Bill allows for further regulation in the future, which is welcome. But crypto has become the wild west, increasingly used by fraudsters both as a scam in itself and as a means of extracting value from other scams.
The Government’s stated objective is that activities having the same risk should have the same regulatory outcomes. Crypto is clearly of the highest risk, but it is almost entirely unregulated. That feels like a missed opportunity. When will we see crypto assets being properly regulated?
The Bill requires the PSR to consult and to regulate for the mandatory reimbursement of victims of APP scams which used faster payments. That is very welcome, but it is only a very minor step in addressing the huge and growing fraud epidemic to which the noble Lord, Lord Hunt, referred earlier. Why does it include only faster payments and not all forms of payment? Faster payments themselves are part of the problem, so where is the ability to slow down payments in certain circumstances? What about the sharing of the liability, preferably with all those who facilitate the crime, such as social media and telecoms companies, or at least the sharing of the liability between the victim’s bank and the bank which received and processed the money for the fraudster? Has the Minister read the recent report from the Fraud Act 2006 and Digital Fraud Committee,  of which I am a member? When will we see real action from the Government to address fraud, not just consultation?
The inclusion of access to cash is welcome, but access to cash is meaningless if cash is not accepted. The main reason why businesses stop accepting cash is the closure of nearby bank branches where it can be deposited. I again agree with the noble Lord, Lord Hunt, that we need to find a solution to the closure of bank branches.
Overall, this is a necessary Bill, and I generally support it. However, there are areas where it could be usefully improved, and I hope the Government will be receptive to constructive suggestions during the next stages.

Archbishop of Canterbury: My Lords, this year marks the 10th anniversary of the final report of the Parliamentary Commission on Banking Standards, Changing Banking for Good. I declare my interest having served on that commission, and I welcome the presence in this debate of the noble Baroness, Lady Kramer, who also served, as did the current Lord Speaker. I also welcome the maiden speeches of three noble Lords today: the noble Lords, Lord Ashcombe and Lord Remnant, and the noble Baroness, Lady Lawlor.
We need to remember that the extraordinary crisis in 2008—which led to the various commissions, reports and changes in regulations, including the financial services Act 2013, in which the Parliamentary Commission on Banking Standards played a part—caused huge and ongoing crises. While welcoming the Bill very strongly, I join some of the hesitations mentioned by the noble Lords, Lord Hunt, Lord Sharkey and Lord Vaux. It has been estimated that the financial services industry, and particularly the major banks, have an effective subsidy as a result of the implicit government guarantee that they receive, which is worth approximately £30 billion a year. If there is £30 billion a year going spare, many other industries and not a few churches would welcome that very warmly. However, that subsidy, which is at the risk of the taxpayer, as we saw in 2008 and 2009, is what gives the result of the banks having heavy social obligations; we must look carefully at that when the Bill reaches Committee, as has already been said. The issues of inclusion, stability and access at all levels, especially for micro-businesses, are very important, not least for levelling up.
I will raise three particular and short issues, the first of which is the human factor. The banking standards commission commented that, in the rapidly changing science of the financial markets, regulation is a vain hope, as the noble Lord, Lord Vaux, has already said. By the time regulation is brought in to address a problem, all but the doziest horses will have long since fled the stable. The commission highlighted that the question of culture is at the heart of good banking practice: attitudes of greed, the socialising of losses and the personalising of profits, the kind of legacy people wish to leave, and the issues of virtue. Is the mindset and approach of key leaders in the industry one of casino banking or banking for the common good? That is essentially a moral question.
Some of that is addressed very well in the Bill. I particularly welcome Clause 69, addressing credit unions, and the opportunity that that will give for levelling up and extending the range of financial access to small businesses. But we see in the recent crypto-market crash a perfect example of the failure of culture, as well of regulation, and of technology moving infinitely faster than any regulation. We need a system that is agile and keeps regulation light, so that the industry is competitive, but keeps principles tough and flexible, with heavy consequences for breaking them.
On the importance of capital adequacy and the ring- fence, this was clear at the time of 2008, when one of the major banks had 2% capital to support a more than £1 trillion balance sheet. We need to recognise that banks go under because of bad lending and bad dealing, and the remedy to that is adequate capital and adequate principles and culture—otherwise, we will get back to the point, as we did in 2008, where the taxpayer bears the burden.
Finally, we need competition and an effective industry but not a race to the bottom. There needs to be a race to the top, to the best-quality services, which serve people and the common good both now and in future generations through its green aspects. There has been a tendency over the years to say how much the City contributes, but let us be clear that, if we take into account the roughly £250 billion pumped into the banking system in 2008, it is not so obvious that the City is in credit to the taxpayer—it may well be that it is in significant debit. Nevertheless, this Bill is very positive. As long as it ends up reminding financial services that they are services for all and has principles at its heart, it will be welcomed and make a significant difference.

Lord Bridges of Headley: My Lords, I declare my interest as an adviser to and shareholder in Banco Santander.
This Bill touches on many topics, but I want to focus on two big questions: what are the objectives of financial services regulation, and who holds the regulators to account, and how?
On the first question, we know that the main objectives of regulation are ensuring that markets function well and that there is market stability, market integrity and consumer protection. As has been said, this Bill adds a secondary objective of competitiveness and growth. I support that new objective entirely, not because I want a race to the bottom—quite the reverse. I believe that simple, proportionate and robust regulation, applied by regulators in a timely, consistent way, is the bedrock of a competitive financial centre. To achieve that, regulation must reflect developments in finance.
We all know how much finance has changed over the past decade or so, since the financial crisis: crypto, AI and blockchain—technology in all its guises—turbocharging areas such as payments; green finance and ESG; not to mention the rise in Asian markets. All this has dramatically reshaped the financial sector, not just here but across the world. For us, obviously we have had Brexit, raising challenges but also opportunities. We need our regulators to be mindful of this new world in all they do, so that our financial service sector continues to attract capital, investment  and talent—and, yes, that means change. But regulations are judgments; they are made at a moment in time. We should not get into the mindset of treating them, dare I say it, as tablets of stone, brought down from the mountain and never to be changed.
To ensure that our regulatory framework is fit for purpose, we must remember the lessons learned in previous crises, but we must not regulate via the rear-view mirror but for the world as it is and for emerging risks. My concern is not that the new objective goes too far but the reverse: that it will not have any meaningful impact. One reason for that is that it is a secondary, not a primary, objective. Another reason is that I question how it is going to sit alongside the new regulatory principle contained in the Bill that regulators must be mindful of the Climate Change Act 2008. How many trade-offs, should they arise, would be made between the green objective and competitiveness?
This brings me to another concern and my second big question: who holds the regulators to account? There is of course the specific issue of how regulators will be held to account in implementing the new secondary objective, but there is a much broader issue, raised a moment ago by the noble Lord, Lord Vaux. The Bill will give ever more power to unelected regulators; how are they going to be held to account? Of course, they are independent, but independence and accountability must go together hand in hand, and by accountability I mean regular systematic processes whereby the main actions of the regulators are thoroughly scrutinised by Parliament. As has been said, we have no such effective system at the moment.
I know the Bill stipulates that the Treasury Select Committee will scrutinise consultations, but consider just one fact: last year, on my reckoning, the FCA, the PRA and the Payment Systems Regulator between them launched 75 consultations—and that is just consultations, not policy statements or anything else. On my reckoning, there is no way that one parliamentary committee, under the current system as currently resourced, can possibly scrutinise this torrent of regulation; it will simply be washed away by the flood. Of course, we need to avoid politicising the regulatory process, which would undermine the confidence we all want. We also need to avoid parliamentary scrutiny making regulators so nervous that they become excessively cautious in all they do, gold-plating regulation and creating the stability of the graveyard. That said, we need to have an answer to this simple question: who regulates the regulators? At the moment, as the Bill stands there is no clear and effective answer.

Baroness Twycross: My Lords, I look forward to hearing the maiden speeches of the noble Lords, Lord Remnant and Lord Ashcombe, and the noble Baroness, Lady Lawlor. I join others in welcoming them to the House. I declare an interest as London’s Deputy Mayor for Fire and Resilience, as the points I shall raise relate to an issue identified as a risk to the resilience of individuals and vulnerable groups—a societal risk—in the London City Resilience Strategy in 2020. This strategy, published shortly before the first Covid lockdown, identified the trend in digital transactions and away from cash:
“A proliferation of digital payment technologies allow individuals to all but avoid the use of cash on a day to day basis. According to the AT Kearney Global Trends 2019-2024 Report ‘the growth of digital applications, e-commerce, and online payment technologies will keep growing over the next five years and beyond’ and we are ‘likely to see the emergence of the first truly cashless society in the next five years. A move away from cash may pose a risk to certain vulnerable groups, notably those facing barriers to digital transactions, or those more likely to be excluded from the mainstream banking system. This could affect the resilience of these groups, as well as … the personal resilience of isolated people, including older generations who are more likely to be reliant on cash.”
During the pandemic, there was a clear acceleration of cashless services, with the organisation LINK identifying that use of cash has reduced by 40% compared with pre-pandemic levels. More recently, however, there has been a subsequent increase in the use of cash by consumers during the cost of living crisis, with 10% of people saying they plan to use cash more than previously to help them budget. This alone demonstrates a clear continued need for cash by the public, despite what has been described as the turbocharging of a move away from cash since 2020. It is welcome, therefore, that the Bill includes a requirement on the Treasury to publish a cash access strategy and a requirement on the FCA to ensure reasonable provision of cash access services—and “reasonable” should, must, mean “adequate”.
The requirements must also ensure that older people, those with disabilities and those on a lower income who rely on cash are not adversely affected. We have a tradition in this country that the public are not charged for withdrawing their own money. This is a good tradition and should become an explicit right. This legislation should make it clear that there should be a default right to access cash free of charge and a right to use cash to buy basic goods and services for those for whom other forms of payment are not an option. This group, which is at risk of being marginalised, includes more than 5 million people who rely on using cash for their normal spending—a significant minority who should be protected.
Equally important is that there is no poverty premium on cash users and that the decline in free-to-use ATMs and the increase in pay-to-use ATMs—all too often found in some of our most deprived communities, as well as many rural communities—are halted. The closure of almost 6,000 bank and building society branches since the start of 2015, as has been noted, has left many consumers without easy access to a bank branch and is exacerbating the issue.
There have been some imaginative approaches to piloting ways to address these issues, but more needs to be done to assess the pilots to make sure they work and to roll out measures that can address this issue. The Bill provides the ideal opportunity to do this. I agree with the noble Lord, Lord Hunt, that it could go further in this regard. As the consumer organisation Which? has said, we need to avoid sleepwalking into
“a situation where cash users struggle to make purchases or are excluded from certain services.”
Without ambitious plans to ensure that all those who require cash can still use it and that they have easy and free access to it, there is a clear risk of further increasing the impact of financial exclusion, which is all too widespread in our society already.

Baroness Bowles of Berkhamsted: My Lords, I declare my financial services interests in the register and my membership of the international Systemic Risk Council.
This Bill falls short on accountability. During the passage of the 2021 FSA, I suggested regular independent reviews akin to the Australian system—a more advanced vision than the sporadic reviews in this Bill, which are reliant on government initiation. Why not have rolling and thematic reviews and regulators reporting to Parliament under independent assessment criteria, such as from the NAO?
The framework consultation touted parliamentary scrutiny as a safeguard, but that is deceptive when the Government have blocked adequate parliamentary influence. Committees have modest power through public interrogation, and Ministers now regularly avoid attending Lords committees. Should parliamentary reports not get specific attention in review processes, not least to reflect public interest, which is left faint among the numerous industry hotlines to Downing Street? The Government cannot hide behind regulatory independence when they fix the regulatory perimeter and key policies, appoint regulators and control reviews. Failure is on the tab of government—maybe a different one further down the track, but the collective reputation of the UK in financial services is on the line.
We have just had an example of that with the market turmoil from DB pension schemes. At its root is the setting aside since 2005 of EU rules requiring pension scheme investment to be vanilla because pension schemes have only light-touch supervision and trustees are mainly ordinary folk and not financial experts. Trustees were thus left at the mercy of unregulated, liability-shirking advisers and the hapless Pensions Regulator.
I have been involved in investigations through the Industry and Regulators Committee, giving evidence to the Work and Pensions Committee and participating in conferences, where polling on the biggest loser in the debacle put the reputation of the UK top. Gilt turmoil is a named issue in papers for international organisations looking at systemic risk.
The timid excuse is that we are waiting for international agreement relating to non-bank systemic risk—that is outrageous, given that this is a UK-created and UK-specific issue of financial stability, with a regulators’ muddle, gaps and an issue that the Financial Policy Committee should have been all over. In evidence to the Economic Affairs Committee, Sir Paul Tucker questioned the point of the Financial Policy Committee if all it does is report. Now, there is some pulling up of socks, again after the event. Systemic risk exists in many funds, but the corralling and correlation of risky investment strategies in pension schemes with emphasis and concentration in gilts is uniquely ours, uniquely crafted and well-known where it should have mattered. It is not black swans and larger buffers; Bank of England yield tables show turmoil well under way at under 40 basis points’ change, and the transposition dirty secret has long been protected by the Treasury and its alumni.
The Bill also touches on issues of cryptocurrency and critical third parties, a reminder that financial services are not really penned in to entity and activity-based perimeters. As the IMF said, we are already into the era of reimagining regulation, otherwise it is not possible to cope with fintech or big tech which blur and exploit the boundaries of regulation. Online brokerage mimics the addictive features of social media, targeting the vulnerable. We regulate gambling but we do not even have robust age verification for online investing. Fraud is at epidemic levels and respects no regulatory boundaries. Far from having agile principles and simple regulation, we have a rigid perimeter and rule dinosaur, which is fostering fraud and revelling in the abuse of position and asymmetry of information. Regulators are operationally inefficient, underfunded, late and thwarted on enforcement.
Financial services are the food of the economy. Where there is harm, there should be justice—and not just where it is regulated. I will be offering amendments.

Lord Cromwell: My Lords, how do I follow that? It is always a pleasure to follow the noble Baroness, Lady Bowles, with her knowledge and her forensic contributions. I also look forward to the three maiden speeches we are going to hear this evening.
In the time available, I will speak about two things—including, perhaps perversely, one that is not yet in the Bill—and then say a few words about crypto. I saw in the Financial Times today that the new chair of the Treasury Select Committee rather humorously described crypto as:
“The freedom for people to do silly things with their money”.
The absent area is the urgent need to tackle the use of dirty money to prevent public interest investigations into market participants. It is widely recognised that the UK legal system is used, often with money very questionably obtained and possibly laundered in UK markets, to suppress the publication of matters in the public interest. We discussed these activities—which have become known as SLAPPs or lawfare—during the passage of the economic crime Act, so I do not propose to repeat what was said then. Nevertheless, the use of such intimidation to suppress, in the context of this Bill, matters of keen investor need-to-know interest is a distortion of the information and accountability that should underpin efficient financial markets in the UK.
The Bill seeks to address the senior managers regime standards and conduct rules. It should also address this area of coercion, which prevents markets and investors being properly informed about the activities of some leading business figures, illegal activities, market abuse and corruption. For example, there are newspapers which today will not publish stories about so-called oligarchs for fear of the lawfare that will then be waged against them. The consultation following the economic crime Act resulted in a statement from the Secretary of State on 20 July last year that primary legislation would be introduced at the earliest opportunity to enable an early dismissal of such cases. This was recently and vigorously reiterated in response to an Oral Question in this House.
There is both government and cross-party support for cleaning up this abuse of our financial markets and the associated legal system. I should inform the House also that the necessary clauses to give effect to this government commitment have already been drawn up by lawyers and could be included in the Bill. So far, so good. However, the noble Lord answering the Oral Question I referred to a moment ago described the selection of the right legislative vehicle to bring this into effect as “above my pay grade”. Therein lies the problem. It seems that everyone agrees that this legislation is needed, but where is the government impetus to get it done? The matter has become a legislative Cinderella, but the pantomime season is over and it is high time that the promised legislation was enacted. I therefore ask the Minister, when she winds up today’s discussions, whether she will agree to meet with me and others to review the clauses proposed, with a view to arriving at an appropriate amendment to the Bill.
I turn briefly to digital assets, and declare my membership of the APPG for crypto. Blockchain and digital assets are already here, and here to stay. I have long advocated UK regulators getting a better understanding of them, so it is encouraging to see the Bill making some steps in that direction. The Bill introduces a new term, “digital settlement assets”, and appears to put the regulator’s toe in the water with stablecoins, albeit only as a medium of exchange. However, it then makes provision for going far wider—and using secondary legislation—to enable engagement, seemingly with any other digital and crypto assets. Despite my interest in this area, I must sound a note of caution. The constant evolution of digital assets represents not just a financial revolution but a technological and conceptual one that will not fit simply into existing regulatory categories and approaches. Managing emerging innovation and opportunities while preventing abuse is going to pose serious capacity and structural challenges to the regulators. I say candidly that I have my doubts as to whether the FCA is really ready for this.
Today, in brief, I have just two questions for the Minister. First, stablecoins sound so inviting, do they not? However, in reality some have proved to be far from stable, and even those backed 100% by a fiat currency are subject to fluctuations in that underlying currency. I therefore ask the Minister to clarify whether the Treasury is concerned about this and, in particular, whether it has a clear definition of what tests an asset must pass to be truly worthy of branding itself to retail investors as a stablecoin. Finally, and more succinctly, the Treasury surprised us all some time ago by announcing that it was going to produce its own non-fungible token. Can the Minister confirm that this is still the case, and if so, why, or was it just a passing fancy of the Government to be down with the crypto bros?

Lord Hill of Oareford: My Lords, I declare my interest as both the lead NED at the Treasury and an adviser to financial and professional service firms in Europe and the UK. My real interest today is in talking about the accountability of the new regulatory framework proposed in the Bill.
The underlying purpose of the Bill is clear enough: to give our financial regulators more independence and more flexibility in setting the regulatory framework for our financial services. As someone who was responsible for financial regulation in the EU and who saw some of the downsides of that rather clunky, consensus-based system, I fully support that objective. The ideal regulatory framework is flexible and dynamic. Risk is not static, and regulation should not be static either.
But if we are to give our regulators more independence and more control day to day over an industry that is so important to the well-being of our country, that surely has to go hand in hand with more accountability. The question that follows is whether this Bill does enough to increase the accountability of our regulators alongside the increase in independence that it clearly gives them. The answer at the moment is that it does not.
To say we need more accountability is not, by the way, to attack our regulators or question the importance of independence. They have an incredibly difficult job and have gradually had more responsibilities dumped on them by politicians who have outsourced their own responsibility for managing risk. If we get it right, clear accountability should strengthen our regulators and protect their independence.
When we talk about accountability, we first need to be clear on our terms. I draw a distinction between the regulations themselves on the one hand and the application of those regulations on the other. Very often, the two are conflated and we just talk loosely about regulation, but the UK’s overall regulatory environment, and our competitive position, are shaped by both the detailed law and what we might call regulatory culture or behaviour. Both affect sentiment in the marketplace and shape the decisions that companies take as to where they want to base their business. When people grumble about regulation in the UK, it is often the process—the length of time it takes to get approvals, inefficiencies, a box-ticking mentality—rather than the rules themselves which infuriates them.
I draw this distinction because we need accountability mechanisms which cover both points—both the rule-making and the application of those rules. When we talk about holding the regulators to account, I am sure we will have a lot of discussion about the proper role of Parliament in the process. As has already been asked, does a session in front of the Treasury Select Committee amount to proper accountability? Is the TSC properly set up and resourced to provide proper scrutiny? Clearly, the answer to both questions is no.
We also need to look at non-parliamentary mechanisms for increasing accountability. Should the regulators publish how long it takes them to process approvals, for example? Should an independent body provide some comparative statistics on how UK regulators do compared with other jurisdictions? Can we beef up the annual “state of the City” report which the then Chancellor, Mr Sunak, committed to publish once a year? Should we think about establishing a body modelled on the OBR which could provide some independent validation of the work the regulators are doing? After all, their decisions have a massive impact on the functioning of our economy and thus our ability to fund public services. If it is good enough for the Treasury goose to have the OBR, why not for the regulatory gander?
This is a vital Bill which will set the framework for one of our most important industries for years to come. I am all for the independence for the regulators it contains, but we will need to do better on accountability.

Lord Frost: My Lords, as has been said by many, this is very important legislation. It is crucial to giving effective support to the City and our financial services sector more broadly, and there is a lot of good stuff in it. I want to begin by highlighting three of those good things.
First, I welcome the broad approach taken to the onboarded EU legislation on our statute book. It has taken the Government a long time to get here, but the powers to revoke and replace with genuine UK legislation and rules are very important. They show that it is entirely possible to take an ambitious and potentially sweeping approach in this area, which I hope the Government will follow more generally in the other reviews of aspects of our domestic legislation which are under way, if perhaps not taking quite so long about it.
Secondly, the secondary objective on competitiveness is a very good thing. I fear it will be undermined by the duty of compliance with net zero as a regulatory principle as well, but nevertheless it is a very good secondary objective. Obviously, it is correct that regulators should have to pay due regard to our economic prospects in their actions.
Thirdly, the proposals in the Bill to support access to cash are very important. I support much of what the noble Baroness, Lady Twycross, said on this subject. Access to cash is important not just for practical and social inclusion reasons but also to preserve a bit of personal freedom and the ability to conduct transactions without the Government or institutions looking over your shoulder. There is of course no point in financial institutions ensuring access to cash if there is in practice nowhere to spend it, so I hope the Government will look in due course at the other side of this problem—the withdrawal of cash in the retail sector more broadly. Getting this right is in the interests of a free and inclusive society.
As others have not mentioned it yet, I mention in passing the commitment made by the Minister in the other place to keep under close scrutiny the PayPal issue—the withdrawal of financial services for essentially political reasons. I welcome the Minister’s commitment to follow up on that and possibly to use the powers in the Bill if necessary.
As with others, my main concern with the Bill is on the accountability of regulators. I have two concerns. The first issue is the quality of regulation. It seems a little pas comme il faut nowadays to criticise the independence of the regulators, but independence is not the same as immunity. It is right to acknowledge the concerns that the FCA and PRA potentially have powers that are too wide-ranging already and sometimes appear to act with impunity, and that sometimes firms are reluctant to challenge because of their relationship with the regulator. There is no statutory requirement on the regulators to make clear rules or act predictably or consistently and, as others have said, sometimes they are slow, risk-averse and reluctant to commit themselves, and that in itself can harm competitiveness.
The second issue is the politics of regulation. The way the regulators fulfil the objectives they are given is in practice highly political. There are many ways of fulfilling those objectives and in choosing how to do so they reflect a political view. They have to make such judgments; for example, and most obviously, on whether the City’s prospects are best protected by divergence—my view—or relative alignment with the way things are done in the EU. That is a political judgment, influenced by the Government’s view, yet the Bill gives the Government no way to compel regulators to act in line with such a political view. The prickly reaction of the regulators to the call-in power, which is now dropped—in my view, mistakenly—shows clearly that they want to keep discretion in this area. I worry that the Bill will create a system in which all the incentives are to go along with what regulators want in order to avoid public arguments.
To conclude, giving new rule-making powers to the regulators against this backdrop, without corresponding duties and genuine accountability, is pretty risky. The system it would put in place of only post-facto accountability involving only the Treasury Select Committee is not good enough. There are likely to be amendments on this subject and I hope the Government will look carefully at them. With those caveats, I am happy to support the Second Reading of the Bill, but I hope the Government will look to improve it in Committee.

Lord Davies of Brixton: My Lords, I should mention that I am a fellow of the Institute and Faculty of Actuaries and, in one way or another, have worked in the financial services industry throughout my professional career, albeit generally on behalf of consumers.
The Bill is in effect a Brexit Bill, as emphasised by the two previous speakers, but the Government are taking the opportunity to pursue wide-ranging changes in the way the industry is regulated. This has led to the concerns which have been expressed and will be expressed subsequently in the debate. For my part, my main concern is to ensure, given any changes, that the interests of consumers are fully protected. The industry owes a duty of care to consumers, and how this should be implemented needs to be set out clearly and directly in the Bill.
Against that background, I want to highlight one aspect of providing care for consumers where more needs to be done. Mental health and financial circumstances are clearly linked. Problems with your mental health can make it harder to earn money, to manage spending and, crucially in the context of financial services, to get a fair deal on products and services. Facing financial difficulties should not result in needing mental health treatment, but too often those things come hand in hand. Financial difficulty itself causes stress and anxiety, but this is often made worse by, for example, collections activity or having to go without essentials. It is important, therefore, to understand the scale of the problem. In any given year, one in four people will experience a mental health problem, and the pandemic and the cost of living crisis have made things worse.
Common symptoms of mental health problems, such as low motivation, unreliable memory, limited concentration and reduced planning and problem-solving abilities, can make managing money significantly harder. Those symptoms can also make it more difficult to interact with financial services. For example, four in 10 people say that they find it difficult or distressing to make phone calls. Experiencing a mental health problem can also make people more vulnerable to fraud and scams. People with mental health problems are three times more likely to report that they have been the victim of an online scam than other people.
The relevance of all this to the Bill is that the financial services industry needs to be placed under an explicit obligation to act responsibly towards its customers who have mental health problems. The industry needs to recognise and understand the nature and scale of these problems, it should be placed under a duty of care towards its customers, and it should be required to take active steps that will minimise the potential difficulties faced by those who have or are at risk of having mental health problems that are associated with their finances. Obviously, this will be of benefit to the individuals concerned, but it will also relieve much of the pressure on our mental health services, and, finally, it will be of benefit to the financial services industry itself in not accumulating bad business.

Baroness Sheehan: My Lords, I declare my interest as a director of Peers for the Planet. The public want action on climate change. When people are given a choice, they are voting with their feet—the uptake of electric cars, which is beating all expectations, is a case in point. It is clear that businesses and financiers also want a robust net-zero framework. The UK Sustainable Investment and Finance Association, an organisation of over 300 financial services firms with over £19 trillion in assets under management, published recommendations of a number of “critical actions” to move the UK’s financial sector towards net zero. The Aldersgate Group business alliance, which has a collective global turnover of over £550 billion, has noted how the
“lack of clarity on the direction of public policy confuses businesses and investors and leads to an ineffective allocation of money.”
People and businesses want action because the dire impacts of climate change are visibly here with us now, and the increasing ferocity of climate events has taken even pessimistic scientists by surprise. The Met Office has confirmed that 2022 was the hottest year on record in the UK, and 2023 is set to be even hotter. This legislation should reflect that concern.
I will leave it to others far more knowledgeable than myself to speak on the technicalities of the regulatory framework for financial services and to say whether the Bill is fit for purpose. I will confine the rest of my remarks to what I believe to be a serious shortcoming of the Bill, which is its almost dismissive approach to the role that money plays in safeguarding the health and natural capital of our planet.
To start with deforestation, the agriculture, forestry and land use sector produces almost a quarter of all global greenhouse gas emissions. The Global Resource  Initiative task force, established by the Government and comprising finance and private sector leaders, has independently recommended the introduction of new legislation applying deforestation and human rights due diligence obligations to UK financial institutions. Its report is worth reading—the stakes are high. It states:
“No pathway to 1.5 degrees is possible without addressing forest loss”.
However:
“If properly protected and restored, forests and other ecosystems could provide more than one-third of the total CO2 reductions required to keep global warming below 2° C. This decade provides a narrowing window of time to act.”
Deforestation is a “top priority area” in the UK’s net zero strategy, yet the UK is a major financier of global deforestation. The Government could have used the Bill to follow through on the GRI’s recommendation and stop UK financial institutions bankrolling forest destruction abroad to the tune of hundreds of billions of pounds. Why did they not do so?
I have a list of other concerns, which include: the regulators’ requirement to “have regard to” climate goals is inadequate to support net zero and nature; the removal of sustainable disclosure requirements from the Bill is causing concern; there is a need for a better interpretation of “fiduciary duty” to help clarify that climate change is financial risk; and, last but not least, the implications of the abolition of Solvency II rules and the safeguarding of environmental targets by a replacement regime—information on that would be welcome.
In conclusion, the markets serve a societal function, but they are there to serve us, and it is up to the Government to set the parameters within which the market will deliver the social and environmental values without which we cannot thrive.

Lord Forsyth of Drumlean: My Lords, I declare my interest as set out in the register as chairman of a publicly quoted bank. I am also regulated by the PRA and the FCA under the senior managers regime, so I am putting a book down my trousers for the rest of my speech.
I welcome the Bill and its commitment to supporting our financial services sector by creating competition and removing needless bureaucracy and regulations which were made for Europe but were wrong for Britain. There is, however, a fundamental weakness that needs to be addressed in Committee. That is, while the Bill gives regulators more powers and independence, it is shockingly weak on ensuring their accountability to Parliament. These points have been made by the noble Baroness, Lady Bowles, and my noble friends Lord Bridges, Lord Frost and Lord Hill, so I think there is a degree of consensus across the House on this matter.
That accountability is vitally important to ensure that we achieve the growth and wealth creation our country desperately needs after the ravages of Covid lockdown. We have already seen the undermining of Parliament’s role in voting means of supply, with the Bank of England’s expansion of its balance sheet through quantitative easing—money created out of  thin air on an industrial scale. Quantitative easing amounts to just short of £1 trillion—in fact, almost 40% of our GDP—in which Parliament was a bystander and the Chancellor unable to be held to account because we are told the Bank of England is independent.
Your Lordships’ Economic Affairs Committee warned that QE was a dangerous addiction in 2021 and that the Bank’s view that inflation was a transient phenomenon while continuing with QE risked serious inflation. Its own chief economist resigned while expressing similar concerns. The committee was ignored, and it turned out to be right and the Bank wrong. The consequences have been inflation, higher interest rates and a bill in excess of £100 billion for taxpayers to allow the asset purchase facility of the Bank of England to pay interest to the banks under an indemnity agreement with the Treasury, which the Treasury has insisted on keeping secret.
I voted for Brexit, to coin a phrase now so popular with the leader of the Opposition, because I wanted to take back control. I wanted to restore to Parliament, particularly the elected House of Commons, the ability to make our laws and be held to account for them at every general election. Frankly, this Bill seems to pass control of regulation from one unelected European bureaucracy to other unelected bureaucracies in the form of the Treasury, the PRA and the FCA. Parliamentary scrutiny and accountability in a thicket of Henry VIII provisions and regulatory powers, whose purpose is unclear, is derisory.
The fact that we have only five minutes each to discuss this Bill is an absolute abuse of the House. Also, as I discovered this afternoon, thanks to the noble Baroness, Lady Bowles, that we are expected to deal with this Bill in a Grand Committee, not on the Floor of the House. Whatever was the Official Opposition thinking in agreeing to such a matter?
Of course, Clause 36 purports to tackle this issue by providing that the FCA and the PRA would have to notify the Treasury Committee when they published a consultation and responded to any committee replies to their consultations. We do not need a clause in the Bill to do that; such a measure already exists. It is already part of custom and practice. Is that really accountability? Is that it? Surely, at the very least, we need a Joint Committee of both Houses made up of Members with the necessary experience and properly resourced, with informed and expert advice for overseeing what is a Herculean task.
There is no timescale associated with achieving the Bill’s objectives and it is not inconceivable that little, if anything, will change. I do also worry about how all this is going to be resourced. It can already take months for regulators to approve senior appointments and transactions in regulated businesses, damaging their ability to operate effectively. The FCA has itself acknowledged that it is underresourced to perform its existing responsibilities. This House and the other place have, on numerous occasions, raised the politically exposed persons regime as it affects Members of Parliament and their families to no clear purpose, but nothing has changed. Nothing has been done about it.
The ECB rules on capital, which limit lending by smaller banks to housebuilders as a result of abuses in Spain and Ireland, continue to apply in the UK at a  time when the Government’s policy requires more housing. It is far more profitable for banks to lend money for mortgages than to build houses, so why are we surprised by the consequent increases in house prices? The countercyclical capital requirements now being introduced as the country experiences recession will require banks to hold more capital, restricting increased lending by smaller banks when so many good businesses need a lifeline. It seems unwise to me but neither the Treasury nor Parliament can do anything about it as the regulator’s independence is not to be questioned. I hope that, during the remaining stages of this Bill, my noble friend the Minister will address these issues.
Brexit presents us with many opportunities, including the chance for Parliament to unleash the talent and expertise of the City. However, I fear that this Bill needs to focus more clearly on execution and delivery. “Doing nothing often leads to the very best of something” might have been good enough for Winnie-the-Pooh but it will not be for us if we are to succeed as a nation.

Baroness Hayman: My Lords, I declare my interest as co-chair of Peers for the Planet. It is a pleasure to follow the noble Lord, Lord Forsyth; I absolutely agree with his comments and those of other noble Lords as to the importance of taking action during the passage of this Bill in terms of the parliamentary accountability gap that currently exists.
At COP 26 in Glasgow, the then Chancellor—now the Prime Minister—pledged to make the UK
“the world’s first net-zero aligned financial centre.”
That pledge reflected both the necessity and opportunity for this country to embrace green growth. The potential benefits of the UK being a global centre for financial flows, which will power the economy of the future, are huge. Embracing innovation and private investment to scale up new technologies can bring sustainable jobs and growth, far from being a barrier to growth, as the noble Lord, Lord Frost, suggested.
According to analysis by McKinsey, the supply of goods and services to enable the global net-zero transition could be worth £l trillion to UK businesses by 2030. However, the UK financial services industry will not be able to fulfil the Prime Minister’s pledge unless it has both the right regulatory framework to support it so to do and the policy certainty and long-term trajectory that give business the confidence to invest. As the helpful briefing for this debate from Aviva makes clear,
“a booming UK green finance sector requires a transparent and trusted market that combats greenwashing, has clear standardised metrics, and levels the playing field to reward rather than penalise early action.”
I fear that, as currently drafted, this Bill is a missed opportunity. For example, consideration of nature appears to be entirely absent from the Bill, and with it the chance for our financial sector to scale up the nascent and fast-growing nature-based solutions market. While we delay, other countries are making leaps ahead in green finance. Both France and Germany have given their regulators statutory objectives linked to climate change and sustainability.
I know that the Minister spoke in her opening speech about the inclusion of a climate change regulatory principle but, as others have said, this is just one of seven regulatory principles that sit beneath the regulator’s main strategic and operational objectives and is much weaker than if the Bill had contained a clear climate objective. I am sure that the issues as to the hierarchy of priorities and the trade-offs between the objectives, the secondary objective and the principles contained in this Bill—the noble Lord, Lord Bridges, mentioned these—are matters to which the Committee will give great attention during the Bill’s passage.
I fear that the Bill also misses the opportunity to progress previously announced policy steps to align our financial services sector with net zero, notably the commitment to require all UK-regulated financial institutions and publicly listed companies to publish net-zero transition plans by 2023. This Bill is the obvious place to legislate for that policy yet it is silent. Progress has also stalled on taking forward the UK sustainability disclosure requirements and the UK taxonomy. An updated green finance strategy has been promised but not yet published. All this delay risks sending a signal to our financial sector and internationally that the Government are unsure about whether they are truly committed to being a leader in green finance.
Yet businesses are calling for clear, consistent policy and long-term financing frameworks. The CBI has said that
“the big policy lever that’s missing is around green growth”
and that businesses are “confused and disappointed” that the Government appear to be going backwards on their green growth agenda. We need strong leadership, a sense of direction and clarity from the Government. With so much to be gained from creating the right regulatory framework to allow our financial sector to capitalise on the green transition and the many investment and growth opportunities, I am really worried that we will not move at pace to become the world’s first net- zero financial centre. If we do not move at pace and decisively, others will beat us to it; all the competitiveness objectives in the world will not change that.

Bishop of St Albans: My Lords, theologians sometimes discuss the personal and social ethics in the teaching of Christ under the three headings of money, sex and power, those three areas which can be the most extraordinary gift and blessing when used rightly and for the common good but which, when they are an end in themselves, can become extraordinarily disruptive. Of these three areas, Christ had most to say about money, as its use reveals our values as individuals and as a society, often in a very stark way. A close reading of this Bill reveals a set of cultural assumptions and values about what is considered important and valuable. There are four areas that I want to highlight and which we need to consider if a growing and vibrant financial sector will work for the common good.
First, on crypto asset regulation, as others have said, we need to act fast both to protect our citizens and so that we do not fall behind the rest of the world. The problem at the moment is that the almost complete  lack of regulation means that, for many people, crypto- currencies are just another form of gambling. The recent collapse of FTX has demonstrated the volatility of this market and its vulnerability to fraud. Some have made a fortune, while others have lost their life savings and will now be looking to the state to provide for them. Just as we need a sensible and balanced approach to the regulation of online gambling, so we need sensible, balanced regulation of crypto- currencies. The provision in this Bill to ensure that crypto is treated as a regulated activity and giving the FCA and the PSR the power and, as others have noted, the resources to do their work and to protect customers, is welcome.
Secondly, His Majesty’s Government’s laudable levelling-up agenda needs to ensure access to cash. Here I declare my interest as president of the Rural Coalition. Over 8 million people across the UK rely on cash, primarily the elderly or those who live in rural areas or not-spots, where you cannot get online. Poorer areas are being dominated by pay-to-use cash machines, which hit poorest people the hardest. Research indicates that the most deprived areas are dominated by private operators charging those most affected by the cost of living crisis to withdraw cash. This is the poverty premium, where the poorest are forced to pay more for essential services. When the Minister sums up, can she tell us whether the FCA is under the same obligation as government departments to rural-proof the regulations that it makes about access to cash? If not, will this requirement be introduced?
Thirdly, I welcome the proposal for credit unions and urge His Majesty’s Government to explore ways in which we can encourage their growth. The Church of England has been involved in a very large project using the insights of credit unions in our secondary schools to teach financial literacy, and to teach young people how to handle cash and their money and how to plan responsibly. We need to build on this work urgently.
Fourthly, on green and zero carbon, it is more urgent than ever that we introduce mandatory net-zero transition plans, so that large companies report on how they will manage the transition to net zero. We are told that the Bill will update
“the objectives of the financial services regulators to ensure a greater focus on long-term growth and international competitiveness.”
However, if we are to fulfil our COP 26 commitments, it will also need a secondary statutory objective to protect and restore nature and deliver a net-zero economy. There is much to be welcomed here, but there is a great deal more work to be done.

Lord Hunt of Wirral: My Lords, I draw attention to my financial services and legal interests as set out in the register, and that I am co-chair of the All-Party Parliamentary Group for Insurance and Financial Services.
As many speakers have pointed out, this Bill represents a golden opportunity to adapt to the new reality of post-Brexit and, we hope, post-pandemic life. Financial services provide over a million jobs directly across the UK, amounting to 8% of GDP. It is a success story and vital to our welfare. However—we must stop  deluding ourselves about this, if any of us still do—the UK is not pre-eminent in the world of financial services. Too much of the big reinsurance work in particular is going elsewhere. There is far too weak a partnership between government and the sector, if indeed there is any meaningful partnership at all. We still await a definitive sustainable financial services deal with the European Union. We also need the right infrastructure and the right tax system.
It is all about having a vision, but it is also about regulatory culture. I use “culture” advisedly. If this legislation fails to address not only the letter of regulatory law but the culture of the regulators, it will have failed. Effective, proportionate, efficient and good regulation is about having the confidence to strip away unnecessary redundant regulation as well as policing necessary regulation. That in turn is about having the right people and the right relationships. I refer not to cosy deals over the third cognac in the Reform Club but to brisk, efficient, timely, professional, mutually respectful regulation, with each side having a lively but robust appreciation of how the other operates.
I strongly welcome the new objectives on competitiveness and growth. Effective regulation should enable the sector to burnish its reputation for efficiency, innovation and integrity. It can also reduce costs, thereby improving access to goods and services. I hope that the necessary metrics can be crafted to provide reassurance that the regulators really do act on these new secondary objectives. I acknowledge and respect the concerns of those who feel that the commitment to growth feels a little bald and even old-fashioned in the light of climate change. I reassure the noble Baronesses, Lady Sheehan and Lady Hayman, that I am constantly struck by how seriously climate change is being taken by a sector that is literally, as well as figuratively, right in the eye of the storm. Financial services growth is increasingly, of necessity, green growth.
Finally, as senior independent director of LINK, I welcome the fact that for the first time ever the concept of access to cash and a right to access it will be enshrined in law. As the noble Baroness, Lady Twycross, pointed out, and the right reverend Prelate the Bishop of St Albans has just mentioned, for millions of people cash is a vital part of day-to-day life. Younger consumers may brush off credit card fraud and the panoply of pins and passwords as a necessary if tiresome aspect of modern life, but for many older citizens all that is an undiscovered country, and one that will remain undiscovered. Sadly, there is no such thing as a free cash withdrawal. The banking hubs have been slow to get moving, bank branches continue to close, and the economic situation squeezes the independent ATM providers more and more.
This Bill barely marks the end of the beginning for this task. I hope that it will be seen as an important milestone. I wish it safe passage and a successful arrival in port.

Baroness Bryan of Partick: My Lords, the Second Reading of this Bill in the other place on 7 September was just one day after Liz Truss became Prime Minister, and just two weeks before her disastrous mini-Budget which has left millions of families facing  frightening hikes in their mortgage payments. The reaction of the markets caused far more damage in one day than industrial action has over months. Markets are not democratic or accountable and, even before this Bill, are only lightly regulated.
The 50 leading economists who signed the letter to the now Prime Minister when he was Chancellor of the Exchequer in May 2022 warned that competitiveness is an inappropriate objective for regulators. They called it a recipe for excessive risk taking that could harm the real economy and reduce economic growth, and said that it was a poorly defined and confusing objective to give a regulator. The most worrying comment coming from across the spectrum of economists was that encouraging competitiveness as outlined in this Bill could result in the same conditions that led to the crisis of 2007.
The case for giving the FCA the task of ensuring competitiveness is at odds with its primary function of regulation. Few are convinced by the Government’s claim that this will not result in a race to the bottom. Evidence shows that lack of regulation results in bigger risk taking for short-term financial gain, at the expense of the rest of society. As Einstein warned us, insanity is doing the same thing over and over again and expecting a different result.
I move on to access to cash. The Government have stated that the Bill will ensure that people across the UK continue to be able to access their own cash with ease. However, there is no end in sight to bank branch closures and the removal of free-to-use ATMs. The seven big banks have already earmarked 193 branches for closure during 2023. There is overwhelming evidence, as has been cited from around this House, that the less well-off suffer most from difficulties in accessing cash.
So it was with dismay that I heard the then Economic Secretary to the Treasury, Richard Fuller, say at Second Reading:
“When I say ‘access to cash’ I mean access to cash. My hon. Friend raises the question of whether that access should be free … I cannot give him that assurance at this stage.”—[Official Report, Commons, 7/9/22; col. 285.]
That, together with the dismissive response from Sheldon Mills from the FCA to the Bill Committee on 19 October, when he was asked about having regard to inclusion, demonstrated a lack of understanding of the impact on people in more deprived areas. That is not acceptable. We expect a much greater commitment to free access to cash to be included in the Bill.
I am sure that, after today’s debate, the Minister will understand that there are some aspects of the Bill that are unacceptable and need to be substantially amended. I look forward to seeing these concerns addressed in Committee. I also look forward with interest to the maiden speeches today, particularly at this point to that of the noble Lord, Lord Remnant.

Lord Remnant: My Lords, it is a great honour and privilege to make my maiden speech today on this important Bill, in which I declare my interest as a director of Prudential and chairman of Coutts. When I remarked to a friend that I was waiting to speak on a topic of which I had some  knowledge, if not expertise, he rather acidly observed that it would then be a very long time before your Lordships heard from me.
I thank noble Lords from all sides of the House for their support and encouragement in the last few months. I am also extremely grateful to all the officers and staff, particularly the doorkeepers and police officers, who have been so helpful in their advice and guidance.
The first Lord Remnant was my great-grandfather. He represented Holborn in the Commons for 28 years, from 1900 to 1928. He is perhaps best known for introducing successfully—but against much opposition, I regret to say—a Bill guaranteeing members of the police force one day’s rest off duty in every seven.
My father was a more infrequent attender, but I well remember sitting on the steps of the Throne, as my son does now, listening to his maiden speech in a debate on invisible exports, which I hope meant more to their Lordships at the time than it did to me as a callow youth.
As for myself, I followed my father into the City, as a chartered accountant and then an investment banker. Since then, I have sat on the boards of major listed financial services companies and so have long been subject to the rules of our financial regulators. I have also been a regulator myself: last year, I stepped down from the Takeover Panel after 10 years as deputy chair.
At the time of the financial crisis, I was working within government as chairman of the Shareholder Executive. I then sat on the board of UKFI, which was responsible for the Government’s shareholdings in the banks, and I was also appointed to the board of Northern Rock as one of the two Government-appointed directors. I can then perhaps view this Bill through the lens of both a regulator and a regulatee, and from the perspective of government, setting a framework which strives to find the right balance between the two.
The overarching objective of this Bill must be to deliver positive change and protection for individuals and business. To achieve this, we must maintain the high regulatory standards that are a cornerstone of the current regime and boost the competitiveness of the UK globally. These two aims need not conflict with each other. Indeed, they should be complementary. Further, there is a quid pro quo for the independence of our regulatory regime which underpins its effectiveness, and that is appropriate scrutiny and accountability of the regulators and their powers.
My main focus is on the regulatory framework proposed and its implications. Of particular note is the introduction of a secondary objective for the PRA and the FCA to promote the sector’s international competitiveness to support long-term growth. This will give business the confidence to expand and invest in the future.
This is an objective which would be by no means unique to the UK. Indeed, it is established globally. My own current experience is in the Far East, where Hong Kong, Singapore and others all have the promotion of economic growth and/or competitiveness as a key objective. This leads to a congruence of interests between industry and regulators, promoting greater access to financial services and improved client offerings.
So, this is a very positive additional dimension to the conduct and capital and solvency rules which should be the prime role of a regulator. Importantly, the Bill proposes economic growth and international competitiveness as a secondary objective. I believe this to be an appropriate balance. All investments carry risk. If the system is such that it effectively mandates regulators to use their powers only to reduce, if not eliminate, risk, the result is likely to be reduced innovation, increased costs and less consumer choice.
The prime responsibility for taking appropriate risk within established risk appetite must lie with companies themselves, in accordance with rules made by regulators and those within a framework set by Parliament. This new secondary goal will mandate our regulators, in the exercise of their powers, to consider proportionality and global competitiveness.
This Bill transfers significant additional powers to our regulators, as EU regulation is transferred from the statute book to the regulators’ rulebooks. So, it is also right that there should be a commensurate increase in accountability and transparency. We need a regime which balances consumer benefits with regulatory burden and cost. Too often, rules expand in response to a perceived problem but there is little analysis of the often greater cost of regulatory intervention.
Therefore, I am very much in favour of the additional reporting requirements which have been introduced into the Bill at this stage, and the strengthening of cost-benefit analysis through the creation of new CBA panels. At a later stage there will be the opportunity to clarify and strengthen these specific proposals further, and to enhance the scope of parliamentary scrutiny. I hope that my noble friend the Minister will be receptive to this.
I believe that these proposals overall are balanced and pragmatic. The Bill lays the foundation for a more competitive financial services sector, without compromising the UK’s high regulatory standards, which can now be tailored to our own specific needs.

Lord Grimstone of Boscobel: My Lords, it is a special pleasure to follow my noble friend Lord Remnant. His eloquent maiden speech clearly demonstrates his deep expertise in financial services. This should be of no surprise to your Lordships, because the City is truly part of his DNA. I had the pleasure of serving on the board of the Shareholder Executive under my noble friend’s chairmanship, and I have witnessed at close quarters his knowledge and integrity. His presence in your Lordships’ House will contribute massively to our wisdom and expertise. I welcome him.
This is an important Bill. The financial services industry is our most important industry. It is a huge driver of economic activity, it creates high-quality jobs throughout the UK and the taxes it pays underpin our ability to provide public services. It is therefore even more remarkable that Governments have paid so little attention to the City in recent years. For example, too little priority was given to the City in the Brexit negotiations, and in general Ministers have shown a marked reluctance to support the industry through either words or deeds. At times, I have even felt that  Ministers were almost ashamed of the City’s existence. Partly as a consequence of this, it is no longer the global force it was. This decline will continue unless something is done about it. Action is urgently needed. Speaking as a former chair of TheCityUK and of two of our largest financial services firms, I have to say that this is a very sorry state of affairs.
This Bill provides the potential to remedy matters. Whether it succeeds in this will depend critically on whether the secondary legislation and rulebooks which will come in its wake, as well as ensuring financial stability and consumer protection, will allow the industry to flourish and remain globally competitive.
Enacting this Bill will, though, mean that the success of our most important industry will rest more than ever on the shoulders of its myriad regulators. The challenge is that our regulatory regimes are not best in class and, despite the many talented people who work for them, neither are our regulators. We have to do something about this. We have created a culture, not just in financial services but elsewhere in our economy, that too often has allowed and, indeed, encouraged regulators to operate in a bubble of their own making. This has no doubt often been rather convenient for Ministers because they have been able to hide behind this bubble.
Your Lordships know what a strong supporter I am of regulatory autonomy, but that autonomy must be exercised within an envelope set by Parliament, with proper accountability and transparency and subject to strong and continuous independent oversight by people who know what they are talking about. No regulator is an island.
Late last year, the Economic Secretary to the Treasury exchanged letters with the CEOs of the PRA and the FCA about the need for world-leading levels of regulatory operational effectiveness. I congratulate him on this initiative. It is interesting that, in his reply, the CEO of the FCA highlighted that it is the FCA board that has statutory responsibility for overseeing the effective use of the FCA’s resources. As an exemplar, this caused me to look at the membership of that board. Although I have no doubt that its independent members fulfil their roles diligently and exercise due care and attention, it is striking that, according to their bios on the FCA website, not one seems to have served on the board of any UK-listed company. I also note that the incoming chairman of the FCA, who again is no doubt very able, has spent the last 20 years of his professional life in Hong Kong—a city I know well, but which is, to say the least, a rather different environment from the City. It is all rather surprising.
I would be very interested if my noble friend the Minister, in responding to this debate, could let us know whether she is satisfied that the FCA board and the other boards that oversee our regulators have the firepower to carry out their appointed tasks.

Baroness Tyler of Enfield: My Lords, I refer to my registered interests as president of the Money Advice Trust and as a member of the Financial Inclusion Commission. I congratulate the noble Lord, Lord Remnant, on his excellent maiden speech.
Although I welcome the Bill overall as an opportunity to strengthen and improve the regulation of the UK’s financial services, in too many places it feels like a missed opportunity. I will focus my remarks on financial inclusion, where I feel the Bill currently falls shorts in important respects. I make no apology for this emphasis, given the huge power imbalance that exists between banks and other financial services providers, who have plenty of people to speak on their behalf, and vulnerable customers, who have far less of a voice in these debates.
As highlighted so compellingly this afternoon, the lack of focus on improving the transparency and accountability of the regulators, and on giving Parliament greater powers of scrutiny, sadly runs through the Bill like a stick of rock. I hope we will be able to redress this balance as it progresses.
The 2017 Lords Select Committee on Financial Exclusion, which I had the privilege to chair, called on the Government to set out a clear strategy for improving financial inclusion in the UK. Without such a strategy, it is simply not possible to make the progress needed to ensure that everyone can access the financial services they need at a price they can afford. The committee also recommended that the Government expand the FCA’s remit to include a statutory duty to promote financial inclusion as one of its key objectives. These key recommendations were reiterated in the 2021 follow-up Liaison Committee report. I readily acknowledge that setting up a Financial Inclusion Policy Forum in response to the Select Committee report provides welcome discussion of some of these issues, but it is no substitute for a government-led strategy, alongside a regulator that has statutory responsibility for ensuring that financial inclusion plays a part in its everyday operations.
We now have the opportunity to plug the “black hole”, as I often call it, that exists between social policy and financial regulation. We have heard time and again how consumer groups are passed between government departments and the FCA, with no one institution willing to act; and how the Treasury refuses to act on well-known issues such as the poverty premium, which we have heard about this afternoon, until enough data is collected, when the only organisation able to obtain this data is the FCA, which in turn says it is not its remit to collect such data.
The Bill provides the opportunity to plug this gap and prevent the most vulnerable falling through the cracks. By giving the FCA a cross-cutting “must have regard” to financial inclusion duty, along with a requirement to publish findings, it will have the ability and incentive to ensure that the needs of those currently denied access due to affordability issues are considered. This will allow clarity on how far market regulation can address financial exclusion and where government-instigated social policy is needed. I will bring forward amendments on this in Committee.
Turning briefly to the duty of care, another Select Committee recommendation, I concur completely with the sentiments expressed by my noble friend Lord Sharkey. A consumer duty as brought forward by the FCA is not a duty of care. The former has many exemptions and does not provide wronged consumers with the right to secure monetary redress through litigation. For accountability and parliamentary sovereignty, it is a matter of real concern that, after  Parliament passed the Financial Services Act, placing a duty on the FCA to consult and bring forward rules on a duty of care, it chose not to. This Bill provides an opportunity to remedy this unsatisfactory state of affairs.
Finally, I turn briefly to access to cash. I welcome the commitment to legislate to give consumers greater protection in accessing and depositing cash. It is long overdue. Difficulties in accessing cash by the 5 million people—I know other figures have been quoted, but that is the figure I have—who still rely on it have grown hugely in recent years. The UK has lost half its bank branch network since 2015 and there has been a 25% decline in free-to-use ATMs since 2018. It is a particular problem for many of the elderly, those with certain physical disabilities and mental health conditions, and those in deprived communities who are digitally excluded and financially vulnerable. I hope to see more action in this area, including extending the FCA’s remit to consider other services that should also be protected. I would like to see the Bill guaranteeing a minimum level of free cash access services and local authorities having the right to request a review of local cash provision.

Lord Butler of Brockwell: My Lords, it is a particular pleasure to start by congratulating the noble Lord, Lord Remnant, on his maiden speech. As it happens, I have often heard him speak before, but always in a frivolous context, so I was awaiting his speech today with particular interest—and he did not disappoint. As the noble Lord, Lord Grimstone, said, his expertise will be a great asset to this House as we consider the Bill.
The regulatory issues have been well identified in the speeches that have been made. There seems to me to be three types of balance: the balance between freedom and regulation; the balance between regulatory independence and the role of the Executive; and the balance between the Executive and Parliament. It is particularly important that we get this balance right in debating this Bill about an industry which is of such huge importance to the British economy and where international competition is so very strong.
I welcome the Bill; it has much to be commended in it. In the first place, it is based on a proper examination of the regulations inherited from the EU. That included extensive consultation with practitioners in the future regulatory framework review between 2019 and 2022. In this respect, it is markedly different from the cavalier attitude taken by the Government in other areas of inherited EU law in the Retained EU Law (Revocation and Reform) Bill. Secondly, although I have not always agreed with the noble Lord, Lord Forsyth, on Brexit, I think it is a particularly important and welcome benefit of Brexit that the United Kingdom has the freedom to establish our own regulatory regime without being bound by some of the more ponderous regulations of the European supervisory authorities. However, that freedom needs to be exercised with prudence.
There has been much reference to the provision in the Bill to give regulators a new statutory objective to promote the international competitiveness and growth of the UK economy with special reference to the financial services industry. That objective has been  generally welcomed, but as the noble Lord, Lord Sharkey, said, the Government owe us an explanation. Before the 2008 crisis, the Financial Services Authority, the predecessor of the FCA and the PRA, had a duty merely to “have regard to” the competitiveness of the UK financial services sector. In the post-mortem on the 2008 crisis, the Treasury recognised this obligation as a factor in regulatory failure leading up to that crisis and, as the noble Lord, Lord Sharkey, said, it was consequently removed from the regulatory remit by the Treasury and Parliament. Just over a decade later, Ministers are seeking to give the regulators a stronger statutory requirement to make sure that their regulatory activities promote the international competitiveness of the financial services sector, not just to have regard to it. I ask the Minister to explain, in replying to the debate, why the Government have concluded that this reversal is safe.
In the proceedings on the Bill we will be debating the degree of delegation of powers to regulators, the balance between the Treasury’s power to make recommendations to the regulators and the regulators’ independence, and the mechanisms for Parliament to oversee these important operations. However, we have to recognise that parliamentary control, to which there has been much reference, is made worse by Parliament’s own procedures. Even when Parliament is given a role in approving statutory instruments, Parliament’s inability to amend such instruments, and its unwillingness to reject them, makes such power purely nominal. The remedy for that lies in our own hands.
Having said that, I believe that there is much to support in the Bill. Although there are plenty of issues for the House to consider and debate, I regard this as an important Bill, and I welcome it.

Lord Naseby: My Lords, I too congratulate my noble friend Lord Remnant on his maiden speech and, in particular, on the depth of that speech in relation to the Bill we have before us this evening. I hope he will contribute in Committee.
My primary congratulations go to His Majesty’s Government. I have had the privilege of serving in the other place and here for 48 and a half years, and I do not think there has been a Bill as helpful to the City of London as this Bill has the ability to be. I say to my noble friend on the Front Bench, and to the whole of her team, well done on actually producing a Bill that is going to help the City of London. There have been a whole lot of positive reactions from the financial services market and from the City itself. I shall pick out just two that I received. First, “The City welcomes the creation of a more nimble, agile and proportionate regulatory regime for the implementation of the FCA’s and PRA’s growth and competitive secondary objective, alongside improving the speed of FCA authorisation turnaround times”. That is a bit mechanical, but it is very important. Equally, and even more important, probably—the noble Baroness, Lady Hayman referred to this—on the issue of the green area, “The world’s financial system through engaging internationally has to facilitate international standards and global alignment, ensuring that the ESG taxonomies are interoperable”. That seems to me absolutely vital. So much for the congratulations.
The other dimension that I noted the other day is the 30 Edinburgh reforms that the Chancellor has brought forward, almost—but not—on the sly. There is no doubt that they are important. One will drive investment into UK growth companies, in particular the new guidance for asset pooling of local government pension schemes—I declare an interest as a trustee of the parliamentary pension scheme. I can assure my noble friend that it is much needed and to be welcomed. I noticed that the leaders involved in this have got together and set up an organisation called the UK Capital Markets Industry Taskforce. That in itself is enormously welcome.
I want primarily to comment on an area that nobody has mentioned to date, thankfully. For some 25 years, I have been involved in the mutual movement. I had the privilege of being the chairman of the Tunbridge Wells Equitable Friendly Society for just over 10 years. As my noble friend on the Front Bench knows, at the moment a Private Member’s Bill from Sir Mark Hendrick, the Co-operatives, Mutuals and Friendly Societies Bill, is going through the Commons. It is there to deal with the scandal, frankly, of the demutualisation of mainly our building societies, which was not to the benefit of investors in the building societies but for somebody else to turn a penny—or several pounds. In its present form, that Bill will match the best legislation that exists in many other countries. It also introduces a voluntary power to enable a mutual to choose a constitutional change so that its legacy assets would be non-distributable, details precisely the destination of any capital surplus on a solvent winding up, and outlines the procedures in the mutual’s moves. That is a major step forward, and I very much hope His Majesty’s Government get it on the statute book. It will certainly have my support.
Secondly, there is the position of raising capital for the mutual movement. I had a Bill, which is on the statute book as the Mutuals’ Deferred Shares Act 2015. It was welcomed by all parties but unfortunately has been bogged down somewhere in the system and very little capital, if any, has been raised by the mutual movement. I understand that the Government are thinking of asking the Law Commission to look at that. I say to my noble friend that that is kicking it into the long grass a bit. I hope we can look at it again.
Finally, we come to the regulatory dimension. It seems to me, as one who sat on the Public Accounts Committee in the other place for some 12 years, that the reason that succeeds is that it is basically backed up by a government body providing the evidence. Maybe that framework is something we should look at. Something certainly needs to be done. We have listened enough this evening to know that movement in that area is absolutely vital.

Lord Sikka: My Lords, I too welcome the noble Lord, Lord Remnant, to the House and thank him for his excellent maiden speech.
This is not a Bill that will clean up the City, enhance its accountability or streamline the regulatory architecture. There are at least 41 overlapping and buck-passing regulators. These include the Bank of England, the FCA, the PRA, 25 anti-money laundering regulators, OPBAS, the Pensions Regulator, the Pension Protection  Fund and sundry others, all poorly co-ordinated. The enforcement architecture is also fragmented. It involves the SFO, the Crown Prosecution Service, the FCA, the National Crime Agency, the Bank of England, the Treasury, the Home Office and God knows who else. Can the Minister explain why this potholed regulatory architecture will not hinder the Bill’s objectives?
The FCA has been severely criticised for its failures in episodes such as Connaught, London Capital & Finance, Blackmore Bond, the Woodford fund and Link Fund Solutions. The Work and Pensions Committee’s July 2021 report relating to protecting pension savers said that the FCA’s evidence lacked integrity. John Swift KC’s December 2021 review into the supervisory intervention on interest rate hedging products criticised the FCA. The National Audit Office investigation into the British Steel Pension Scheme was also critical of the FCA. Can the Minister tell us why the Bill has not been preceded by an inquiry into the operational efficiency of the FCA?
The regulatory apparatus in this country is adept at sweeping things under its dust-laden carpets. Indeed, the Government themselves have done that. They have a history of shielding banks engaged in “criminal conduct”. A good example is that of HSBC, which the Bank of England, the Treasury and the then banking regulator colluded to cover up. This week the Times reported that Barclays, HSBC, NatWest, Standard Chartered and Lloyds are facing nearly 100 lawsuits, mostly in the US, for violating competition law, fixing prices, interest and exchange rate violations, sanction busting and terrorist financing, yet we have not heard a peep about it from anybody in the UK. As usual, they think things will go away. The Bill dilutes the current regulatory system and even eliminates the modicum of independence enjoyed by regulators by empowering Ministers to direct the FCA. Ministers’ objectives are entirely different from the regulators’.
Since 2015, 4,685 bank branches—almost half—have closed. Many districts and villages do not have a physical bank branch and millions cannot access online banking, so it is hard to see how the FCA is promoting effective competition when people just cannot access banking services. Can the Minister explain how the Government are dealing with disappearing bank branches?
The Bill adds an international competitiveness element to the FCA’s remit—something that was removed after the last crash, as others have said. This really opens the floodgates to reckless practices. The regulator would need to look at what Cayman, Bermuda, Belize and other jurisdictions are doing and use those as a benchmark to recalibrate UK regulation. This is ultimately a race to the bottom and will surely undermine the prime objective of securing financial stability.
The collapse of FTX and other companies has led to losses of nearly $1 trillion, which shows that crypto assets and currencies are highly dangerous. Yet instead of banning these dreamt-up currencies, the Bill legitimises the trade. That will send a message to ordinary people that it is perfectly safe to hold and trade in those assets. After all, it is regulated. The ultimate result will be that, before long, the regulators will be paying millions of pounds in compensation. I urge the Minister  to reconsider this part of the Bill, because it could well be the beginning of the next crash. In due course, I will table a number of amendments.

Lord Hodgson of Astley Abbotts: My Lords, I need to begin by reminding the House that I have two interests. I am an approved person under the FCA rules, and I chair a regulated firm.
The Bill is big and important. I always felt that the task of trying to create a Europe-wide regulatory structure to deal with the many different types of financial markets—from quite small and unsophisticated to quite big, as we see in London—was going to be a big ask. Therefore, I was not surprised when we found a number of pinch points, many of which did not operate to London’s advantage. Given that the Bill’s strategic objective is to onshore our regulation, to get rid of one size fits all and to operate within a risk-based assessment framework appropriate to London, I support the Bill.
There are lots of things I would like to talk about, but I have only five minutes. I would like to talk about cash and the role of MiFID II, but I will focus on process. Here I follow the noble Lords, Lord Sharkey and Lord Butler. How do we get from here to there? What is the process to be followed? How is it envisaged that Parliament will play a role in the process envisaged under Chapter 1, Revocation of Retained EU Law? As the noble Lord, Lord Butler, pointed out, this Bill is a carve-out of a much larger Bill that will come before your Lordships’ House in a few weeks.
I chair the Secondary Legislation Scrutiny Committee and we have been taking evidence from Ministers on some of the practical aspects behind the Government’s thinking. I suspect that not many of us—not even my noble friend Lord Forsyth—who voted for Brexit thought that this risked handing powers from Brussels to Whitehall without any serious effective parliamentary scrutiny or involvement along the way.
I have made a rough count of the number of regulations listed in Parts 1 to 3 of Schedule 1; there are, I think, 246. Some of these will be technical and of no significance; others will not. It is this fact that makes the Bill a framework Bill. At the moment of passing the Bill, Parliament will not know what it is signing up to. That is really important. Will all of these 250 or so regulations be treated in the same way? There appears to be no triaging process to sort the important ones from the less important ones. I fear that the idea of saying “Affirmative resolutions go this way, and negative resolutions go that way” may not be sufficient in as complex an exercise as this.
There is a widespread view—again, pointed out by the noble Lord, Lord Butler, in his remarks—that the existing parliamentary powers for scrutinising secondary legislation are inadequate for the increasingly heavy weights being placed upon them. When my noble friend the Minister comes to wind up, will she tell the House what supporting documentation will be made available in respect of each regulation, to aid parliamentary scrutiny? Under current law, any regulation that carries an impact of more than £5 million is required to have  a specific impact assessment, tabled at the time the regulation is laid. If this is now not to be the case, there is a real danger of Parliament being effectively muted.
Secondly, an important statutory requirement is the provision of post- implementation reviews. Post-implementation reviews decide where hope and expectation met reality and how they clashed. If we are not going to have post-implementation reviews—PIRs—then the opportunity for improving government performance will be greatly missed.
Finally, there is the question of tertiary legislation. Tertiary legislation is where the Government hand away the pen to another body, usually having very little if any democratic accountability. Despite that, the laws and regulations that these bodies produce bind us all just as tightly as any other law. Can my noble friend the Minister confirm my understanding that, under Clause 4, all tertiary legislation will be subject only to the negative procedure? If I am right about that, then I am afraid I shall regard this as a very disappointing response.
To conclude, I support the direction of travel of the Bill but, as we enter this brave new world, we should at the same time not allow the role of Parliament to examine, scrutinise and hold the Government to account to be further reduced.

Lord Ashcombe: My Lords, it is a great honour to speak to you today for the first time, concerning the Financial Services and Markets Bill being introduced by the Minister, my noble friend Lady Penn. Before continuing I must declare my interest as an employee of Marsh Limited, the insurance broker.
I would like to take a moment to thank the many who have shown me huge kindness on my arrival in the House feeling like the new schoolboy all over again. I thank the doorkeepers, clerks, special advisers, librarians and Black Rod for their generous advice on so many issues. In particular, I would like to thank my noble friends Lord Glenarthur, Lord Ashton, Lord Borwick and Lady Sanderson, who have encouraged me and given me great help and guidance. Finally, without the help of the Opposition Chief Whip, I think I would still be wandering the passages of this labyrinthine building even now, two months later, yet to be discovered, totally lost. I hope he does not regret it.
The Cubitt dynasty was founded by Thomas Cubitt, who was the first to establish the building contracting business as we know it today. In the process, he became one of the great developers of early 19th century London, including in the development of the Grosvenor estate from Belgravia to the Thames. Two of his best-known buildings are the east front of Buckingham Palace and Osborne on the Isle of Wight. It was not he who was awarded the Ashcombe peerage but his son, my great-great-grandfather, in 1892. George Cubitt served in the House of Commons for over 30 years followed by 25 years in this House. His son Henry followed in his footsteps but was very unfortunate in that he lost his first three sons in the Great War. They are remembered on the Royal Gallery memorial. In 1920, the family building company built the Lutyens-designed Cenotaph in Whitehall.
I inherited not from my father but from his first cousin. I was brought up in the Republic of Ireland and took a civil engineering degree here, then entered the world of insurance where I have spent 35 years working in the energy sector. It is the insurance aspect that brings me here today. Many of us have experience dealing with personal insurance but there is a great deal more to the subject than that. Insurance is one of the country’s greatest economic strengths and a source of vital capital to an increasingly fractious global risk landscape.
Indeed, without the abilities of the London insurance market, grain and other vital foodstuffs trapped in Ukraine would not have been exported last year to those countries desperately in need of food; as the sanctions start to bite there have been many restrictions put in place, but the market has responded by continuing to provide insurance on a humanitarian basis. Also, development and investment in new technologies would be significantly reduced. An example of the London market innovation is the provision of insurance for the surge in green and blue hydrogen prototypical initiatives to reduce carbon footprints and combat climate change.
Insurance has often been portrayed as the poor relation of the City of London. However, this financial sector today employs almost 50,000 people. We have the highest concentration of insurance-related intellectual capital, experience, insurers, brokers and affiliated professional services. This is what makes London a world-leading global insurance market. Using 2020 data, the London market share of the worldwide premium is in excess of $120 billion, although the market share of 7.6% has been static over the last five years. It is larger than its next three competitor markets—Bermuda, Singapore and Zurich—combined but is continually being challenged. The sector generated 24% of the City’s GDP and just under 1.8% of the United Kingdom’s GDP.
One of the secondary objectives of this Bill is for the regulators to promote the growth and competitiveness of the UK economy. An area where the London market has no participation is captive insurance companies. This would certainly be an opportunity for growth as it is a $54 billion industry. Even UK companies such as Network Rail and Transport for London have their captives in foreign jurisdictions. These captive insurance companies are designed to provide insurance to their parent company or its entity. It is no longer the tax legislation, an oft-cited reason for this being the case, but the regulatory hurdles, as the regulators treat them as commercial insurance companies.
Regulators will always remain an important part of the checks and balances of financial business, but they need to be proportionate in recognising that personal consumers need a greater level of protection than the more sophisticated companies, which have significant experience and take professional advice on how to manage their risk protection. It should not be one size fits all.
Secondly, the Bill currently allows the regulators to determine how they believe they have met the requirements of the competitiveness objective. This suggests that they can mark their own homework. Would it not be preferable to have a set of key performance indicators laid down in the Bill, by which they can be measured when reporting back to the Government and Parliament?
With these thoughts in mind, I thank noble Lords for this opportunity and look forward to supporting this Bill, promoting growth and competitiveness for our financial services industry and, ultimately, growing this vital sector of the economy.

Lord Altrincham: My Lords, it is an honour to follow my noble friend Lord Ashcombe, to welcome him to this House and to reflect that it really is a blessing for this Bill that there are three maiden speeches. My noble friend has spent his whole career in insurance. We nearly met around the age of 30, when he was working at Lloyd’s of London but he has always otherwise been at Marsh. He brings expertise to us in financial services that is often, as he said, a little overlooked.
In addition to insurance experience, it is worth adding that my noble friend brings us experience in energy. His whole career has been around energy, which we quite often talk about in this House. Energy and energy infrastructure are important, as is understanding how that infrastructure in this country is laid out. My noble friend brings us expertise in that area. Finally, I would mention that three noble Lords have already asked him for insurance advice. At this time of year, we all have to work out endorsements and exclusions in policies, with the small print and all the rest of it. We may have only one Peer—certainly one Peer in the Chamber today—who really understands this stuff. He would be welcoming of any inquiries as well. He is very welcome and I look forward to working with him for many years ahead, and indeed on the Bill.
Turning to the Bill, I declare my interests as a director of South Molton Street Capital, Financial Services Capital and, in Manchester, the Co-Operative Bank. In the Autumn Statement, the Chancellor reminded us of the importance of growth. He specifically referenced energy, broadband, road and rail. The shadow Chancellor has made some very similar comments, so it is particularly important that we reflect on how the Bill, among the other financial Bills that we have seen, can help to support that growth, in particular with reference to infrastructure. We see Bills come through the Chamber and imagine that they will be financed by somebody, but there is going to be a limit to how much the Government can really support infrastructure investment. The OBR has already said that the Government will need to reduce infrastructure spending in two years’ time.
This means that spending on infrastructure will rest on the private sector and unlocking that private sector capital really rests on the Bill, so it is very welcome that Chapter 3 makes reference to growth. As we know and have heard from many Peers, the regulators have been somewhat cautious and prudent, for the reasons well expressed. At this point, we need to find ways to unlock capital to support infrastructure and for the wider economy. We might look carefully at Chapter 3 and reflect on how to address the growth opportunity, but also some of the concerns expressed about adding risk, or the prudential issues, which have been well covered.
The regulatory environment needs to be a little refreshed. Nearly immediately after this Bill was started in the House of Commons, on 7 September, we ran  into the extraordinary pension LDI debacle. This was around the time when the Bill was going into Committee. It is worth reflecting on how we got to this extraordinary situation, which in some ways arises from an abundance of caution; that is to say, it goes in several steps.
Step 1 was to require companies to reflect actuarial changes in the valuations of their pension funds in their annual accounts. These are modelled changes of future liabilities and, because rates were very low, those liabilities felt very high at the time. It was a prudent thing to do; at the same time, it was not commercial and did not reflect a broader commercial understanding.
Step 2 was, remarkably, to de-risk these funds—that is to say, de-risk them from the point of view of the company and not, incidentally, necessarily that of the beneficiaries—by moving them into gilts. There not being sufficient long-dated gilts, they were moved into derivatives of gilts. These funds were suddenly hugely invested in derivatives for the purpose of de-risking. Again, this de-risking looked somewhat prudent. It is not, as we know, but it looked somewhat prudent then. At the same time, these enormous funds, which are effectively closed—they are in run-off and are barely supervised, while their beneficiaries have little control of them—were invested in an enormous amount of financial derivatives.
Had this growth chapter been in place, some of this error might have been caught. We had an extraordinary situation whereby very large captive funds were not invested in long-dated investments in this country or in infrastructure; we also had the savings of Canadian public schoolteachers making long-dated investments in UK infrastructure, while the savings of our own teachers were put into financial derivatives. This extraordinary debacle is an illustration of how prudent, cautious, step-by-step regulation can lead you into enormous risks.
I commend and support the Bill, which is extremely well thought through and, as the Minister explained, has been broadly consulted on. But regarding Chapter 3 and growth, I hope we will discuss in Committee the opportunities to invest in infrastructure and perhaps to meet the green agenda, which has been mentioned—again, that is often infrastructure. In Chapter 3 lies an opportunity to direct financial regulation for the benefit of the economy and of this country, and to meet the needs of this Government and indeed the next Government.

Baroness Northover: My Lords, I too congratulate those who have just made their maiden speeches. Their expertise will be very welcome. The most reverend Primate the Archbishop of Canterbury spoke of values; others have made it clear that values and self-interest can and should be aligned.
My focus here will be on climate change and the transformative role the financial services sector can and must play in combating this. My question is therefore whether this comprehensive Bill helps to deliver the UK as a green finance centre, as the Government have promised. I noted that the Minister emphasised in her speech that our financial services need to be open and green, as well as technologically advanced.
We are familiar with the pledges agreed by Governments in 2015 in Paris, seeking to keep global warming below 1.5 degrees. We know how far we are from meeting that. Developed countries’ money and pledges are vital but will not deliver on the scale required. A key change that occurred at the Glasgow COP in 2021 was business and finance becoming involved, with outstanding leadership from Mark Carney. That is potentially transformative.
As the noble Baroness, Lady Hayman, pointed out, at COP 26 the Government committed to creating the world’s first net-zero-aligned financial centre and announced that they would mandate large companies to publish their net-zero transition plans and climate reporting standards. Rishi Sunak described the UK as
“the best place in the world for green finance”.
As a trade envoy, I noted the high reputation of the City of London. It needs to maintain that leading role. The Government also committed to match the ambition of the EU on green finance, with particular reference to disclosures of sustainability impacts and the development of a green taxonomy. The UK became the first G20 country to mandate its largest companies to disclose climate-related data.
At COP 26, the International Sustainability Standards Board was announced, to seek global harmonisation in this area. The UK needs to continue to play a leading role in that. Consumers, the public and investors are increasingly scrutinising the green credentials of companies and looking at what banks and funds are investing in. This is where the world is heading. The noble Lord, Lord Ashcombe, has just made clear that the insurance industry is already addressing this. Just as we have seen that the decision to end the sale of new petrol and diesel cars by 2030 has given a major boost to the EV sector, because the automotive industry can see which way it needs to head, the same clarity of intention is required in the financial sector. We need to ensure that regulation shows the direction of travel.
As Chris Skidmore has said in relation to his net zero review for the Government, we may be committed to net zero by 2050, but are the guardrails in place to deliver that? Those guardrails must include regulation. Therefore, what do we see in this legislation? As others have pointed out, the Bill states that regulators should only “have regard” to climate goals. There are seven other principles to which the regulators must also have regard. These are subsidiary to the strategic and operational objectives, as the noble Lord, Lord Vaux, my noble friend Lady Sheehan, the noble Baroness, Lady Hayman, and the right reverend Prelate the Bishop of St Albans have all pointed out. That must be addressed as this Bill goes through.
Shortly before this Bill was announced, it was reported that the Government had removed from the Bill the expected sustainable disclosure requirements. These would have required large companies and financial institutions to disclose and justify their environmental impacts, their alignment with the UK’s green taxonomy and their net zero transition plans. With the publication of their Greening Finance road map in 2021, the Government reaffirmed their commitment to developing a green taxonomy and sustainable disclosure requirements, yet these are delayed.
In the meantime, the EU has legislated in this area. We have already fallen behind, despite the Government’s declared ambitions. HSBC has just announced that it will no longer finance new oil and gas fields. That is the future. Others need to do likewise, with the transformative effect that will have. Regulation can spur that on. This Bill, replacing EU regulation with specific UK regulation, needs to make sure that the UK and London are forward looking, leading the way, modern and drawing in green investment and jobs. I can assure the Minister that there will therefore be amendments to this Bill in this vital area, so I suggest that she starts writing round now.

Lord Thomas of Cwmgiedd: I congratulate the noble Lord, Lord Ashcombe, on his maiden speech and in particular on drawing our attention to the importance of the insurance industry to London’s financial centre—which is often overlooked. I too welcome the Bill warmly and express my interest as chairman of the London Financial Markets Law Committee. I draw attention to that interest because, in the few minutes I have, I would like to ask some questions about the central issue in the Bill: the extent of delegation. How do we do it? How to we make it accountable? One must bear in mind that regulators have two functions. The first is to make law that is binding on us; the second is to interpret and enforce that law when there is a dispute.
I wish to ask four questions. First, are the powers that Parliament is giving to the regulators and delegating to them ones that they can exercise more appropriately than Parliament? The answer to that is generally “yes”, but when we look at certain detailed provisions we must ask: are they being asked to make political decisions—which would be wrong—or are we consigning decisions where we just have to hope that they do what they are asked because there is no accountability? The first question is intricately linked to accountability and a judgment on what is right.
Secondly, have we given the regulators a sufficiently clear mandate for the regulations they are to make? As the noble Lords, Lord Butler and Lord Sharkey, pointed out, there are some contradictions in the Bill. Should we examine those and give clearer guidance? We should not complain hereafter if they tell us, “We’re independent, go away”. Another question which particularly interests lawyers is: are we to give more clear direction as to the type and format of regulation? Are they to follow what has become the traditional European and, to an extent, British Government way of writing long screeds of guidance rather than following good, Victorian principles of short, clearly drafted legislation? It is a question we ought to ask ourselves. Vast rulebooks are a complete disincentive to proper regulation. The more we delegate, the clearer the answer to that question has to be.
The third question we have to ask ourselves is: are we sure that enforcement and punishment for breaches are sufficiently independent of the regulators that make law? When we make law, we do not interpret it or punish people for breaching it; we give that to independent people. The more power we give regulators, the more we have to be satisfied that the interpretation  is independent. You do not want a rulebook where people turn around and say, “I know it’s not clear, but we know what it means because we wrote it”. That is bad lawmaking. Of course, if we have not got that bit right and we do not have proper accountability, there is another problem.
That ties in with the fourth question. We must ask, in respect of all these provisions: is there sufficient accountability to Parliament, to outside bodies or through an independent enforcement agency separate from the lawmaking part? Having spent much of my professional life dealing with the fallout of regulatory failure, I have no doubt that most regulators are competent and hard-working and that they try their hardest to achieve a good result. However, their life is extremely difficult and, if I were a regulator, I would welcome with open arms proper scrutiny. They need all the help they can get. If you are truly independent—having spent much of my life as a judge, I have had to be independent—you always welcome people who cast a critical eye from the outside. The regulators, therefore, ought to welcome scrutiny and not oppose it.

Baroness Noakes: My Lords, I draw attention to my interests in the register, in particular that I hold shares in a number of listed financial services companies. This Bill could certainly have been bolder, and it needs to be improved, but it also has my broad support. I would like to touch on just four aspects of the Bill in the short amount of time we have been allowed.
First, the competitiveness and growth secondary objective is welcome, if overdue. We must never forget that, without a strong economy—and in the context of the UK that inevitably means a strong financial services sector—there will be nothing worth regulating. The financial crisis led to a series of risk-averse reforms and a decade of regulatory gold-plating. It is no coincidence that the last decade has been disappointing in economic terms. We need a period of rebalancing.
However, whatever we do in the Bill will come to nought unless the regulators themselves change. I fear that they will find ways to marginalise the new secondary objective. We need them to put the interests of the UK ahead of the comfort blanket of precautionary regulation and, if necessary, to stand against the consensus in international regulatory fora, however comfortable that seems. The PRA’s public statements to date on what it will do with the new secondary objective and the FCA’s radio silence on the subject do not give me any comfort that they get what is needed.
The Government were right to bring forward amendments in the other place to strengthen the regulators’ reporting arrangements to reinforce the new objective. We will need to explore that in Committee to see how it will work in practice, and I suspect that we will conclude that it will need more teeth.
My second point relates to the role of Parliament. I am glad that the Government have finally accepted that there is an important role for Parliament in holding the regulators to account alongside the transfer of huge new rule-making powers. Most of us argued strongly for that in the passage of the Financial Services Act 2021. My noble friend the Minister will not be  surprised that I am disappointed that the role of your Lordships’ House is something of an afterthought in Clause 36. I promise her that I will return in Committee not only to the role of your Lordships’ House but to the narrow construct of the remit for Parliament in that clause.
My third point concerns getting rid of retained EU law. Chapter 1 of Part 1 of the Bill is very welcome. I fully accept that replacing retained EU law with something tailored to the circumstances of the UK is a large task, but the Bill needs the discipline of a deadline. The approach of the Retained EU Law (Revocation and Reform) Bill is what we should be seeking to replicate in this Bill.
My final point relates to access to cash, and I fear that I shall disappoint my noble friend Lord Holmes of Richmond, who will speak after me. I fully accept that cash remains important to many people, but the fact is that the use of cash is in permanent secular decline. UK Finance expects only 6% of transactions to be in cash form by 2031, down from around 15% now. The Bill imposes costs on all consumers to maintain access to cash for a decreasing proportion of the population. The Access to Cash Review estimated the cost of providing cash at around £5 billion per annum—to put that in context, that is roughly equivalent to 1p on the basic rate of tax. Trying to preserve cash in our society, as if it is part of our national heritage, is just crazy. The Bill goes too far.
I end with a plea for the Government to bring forward a consolidation of financial services legislation. Most of the Bill comprises yet more alterations to FSMA 2000, which is itself already heavily amended. If now is not the right time for consolidation, will my noble friend the Minister say when that time will come?

Lord Holmes of Richmond: My Lords, it is a pleasure to take part in this Second Reading debate and to follow my noble friend Lady Noakes, about whose points I will say more in a moment. I congratulate the two maiden speakers from whom we have heard. I am very much looking forward to my noble friend Lady Lawlor’s maiden speech; I will not detain her much longer. I also congratulate my noble friend the Minister on the eloquence and erudition she showed in introducing the Bill. I declare my interests in the register, particularly those pertaining to fintech advisory work.
I will focus on two areas: financial inclusion and the regulator, mainly because nobody has mentioned the latter yet. Financial inclusion matters not just for those who find themselves on the wrong side of it. If we can drive financial inclusion, there are not just economic but social and national benefits for each and every one of us. That is why I am pleased to see the access to cash clauses in the Bill. It is important because cash still matters; it matters materially to millions. Looking at the reasonableness terms in the Bill, can my noble friend the Minister say what factors will be taken into account when we look at reasonable access to cash? It is a question of both distance—whether that distance is covered by public transport links—   and cost. There are many factors to be considered, and I would welcome more detail on that in her wind-up speech.
As many other noble Lords have commented, access to cash is but one part of this. If there is no acceptance of cash, what currency does cash have if there is no place to spend it? In Committee, it is incredibly important that we look at the whole question of acceptance: which businesses are included; what size they are; what line of business they are in; and business clusters. There are so many issues to consider on how we nail the question of cash acceptance, because, without it, access does not go very far at all, as other noble Lords have commented.
The cashback amendment I tabled to the now Financial Services Act 2021, which my noble friend the Minister was kind enough to reference in her opening speech, demonstrates the enduring importance of cash. Evidence so far, since the introduction of cashback without the need for a purchase, clearly demonstrates that most of those transactions are for £20 or below, and therefore clearly serving individuals who were massively underserved or unserved before the passage of that legislative change.
Finally, on cash, does my noble friend the Minister believe it is time to consider cash as critical national infrastructure, and not just for financial inclusion? In the current uncertain world in which we exist, if there were to be a serious and sustained cyberattack on our financial systems, it seems that cash would provide a pretty robust first line of resilience.
Before noble Lords think that I am all about cash, I am interested in cash only while millions still rely on it and while we have not moved fully to the digital world. The future is inexorably digital, not least for payments. There is nothing necessarily problematic or negative about that, but that future has to be inclusive for all—and the transition to that future has to be similarly inclusive. Is it not high time to build on the work of the Access to Cash Review that the Government commissioned with, crucially, a review of access to digital payments?
On the regulator, as others have said, Parliament needs to consider seriously and urgently what we want our regulators in this space to do, without in any sense encroaching on their independence. What do we want them to do? How do we fit them out to do that? How do we put the structure and resource in place to set them up to succeed? How will we then hold them to account on all the principles which have been set out in that structure? It cannot be the case that it takes nine months for an overseas CEO to be able to come over to work in our financial services. It cannot be that it takes over a year for a start-up business to get a licence to operate in this country. It cannot be the case, as my noble friend Lord Ashcombe pointed out in his excellent maiden speech, that one size fits all. In insurance, how can it be that the same regulatory regime applies whether you are insuring a pet or a plane?
We know how to get this right with regulators. We saw that in the first part of the 2010s with our approach to fintech, and with the sandbox and with GFIN, which came as result of that. There was no better measure of success from the sandbox, and no better  KPI, than the fact that it has been replicated in well over 50 jurisdictions around the world. That was all under Project Innovate; we need a second, third and fourth version of that project to drive forward all the opportunities which currently exist, combining common law, new technologies, and the potential geographic and historical benefits for London and the rest of the UK. As everybody in financial services knows, history is no guarantee of future success.
On the international competitiveness objective and the international perspective, what have the Government looked at in taking the best from around the world in this area—not least the MAS in Singapore, the Swiss regulator, and those in Bermuda and Australia, to name but a few?
In conclusion, this is the most important financial services Bill in a generation. It has extraordinary potential—but it is potential; it will not inevitably drive economic social good for citizens, cities, communities and our country. This is an extraordinary opportunity to make things better. In Committee and on Report, let us all work to make it even better.

Baroness Bennett of Manor Castle: My Lords, having been in your Lordships’ House for a little over three years, I am now on my second financial services Bill, and I have to welcome the level of engagement we are seeing today. I was quite new when the last one happened, and it was in the depths of Covid, but the breadth and quality of debate was not an advertisement for the House. There seemed to be a view that financial services regulation could largely be left to the bankers, hedge fund managers and insurance brokers, yet already today we have heard from the noble Lord, Lord Forsyth of Drumlean, how anyone concerned with house prices should be looking to regulate the financial sector to prevent it being an accelerator of prices rather than a funder of secure, affordable homes. The most reverend Primate the Archbishop of Canterbury said that anyone who wants the banks actually to serve the real economy of small businesses, to which lending has effectively stopped, should be concerned with financial regulation; and of course, anyone who wants a liveable planet with a healthy natural world should be concerned with financial regulation, as the noble Baronesses, Lady Sheehan and Lady Hayman, among others, have highlighted.
We have a financialised economy, including everything from care homes to health provision, public transport to housing, tax dodging to serving oligarchs and plutocrats. Every Member of your Lordships’ House, whatever they regard as their speciality, whether it is alleviation of poverty or delivery of better health education, should be concerned with this Bill, and every member of the public should be concerned with this Bill. So I am going to agree for a second time with the noble Lord, Lord Forsyth, that the official Opposition would be letting the Government and the financial sector off the hook if our Committee stage was consigned to the murky obscurity of the Moses Room. That is, of course, perhaps unsurprising behaviour, given the Times report that the leaders of our official Opposition are heading off to Davos to send a message to the super-rich that Labour is the party of business.
Noble Lords might expect me to focus on nature and climate, but others, most notably the noble Baroness, Lady Sheehan, have already covered at length the “dismissive view” that this Bill takes of the very foundation of our economy, that on which every penny of our banks and every pound in a worker’s pocket depends: functioning ecosystems. But I shall take a more systemic and structural view: what is the financial sector for and what is the economy for? The economy should be in the service of a healthy, prosperous and sustainable society. The financial sector should be a tool for that type of economy, and this Bill should redirect our financial sector towards that. Instead, we have a primary objective of competitiveness. More finance is the aim—snatching it from other nations and growing what we have when we already have too much finance.
The noble Baroness, Lady Penn, in her introduction, proudly boasted that 2.3 million people are employed in the financial sector. We really need to change our thinking here. Human resource is a scarce resource and should be used well. A holder of a maths PhD creating the next complex financial instrument to break the global economy is not an example of it being used well. That person could be improving our health, securing our food supply or increasing the sum of human knowledge. Letting the financiers rip, seeking to lead a global race to the bottom on regulation, when lack of regulation is a huge threat to the security of us all, is heading 180 degrees in the wrong direction.
I could illustrate that point in many ways, but I am going to pick one example—the proposals on position limits in Schedule 2, on page 124 of the Bill. For those in the know, I mention the London Metal Exchange nickel debacle. Some might have read the recent European Economic and Social Committee cry from the heart about much greater regulation of food and commodity trading. As it and many others are identifying, that is a major factor in inflation, hitting every household in the UK and around the world today. A few are profiting while the rest of us pay.
Many commentators—among them I highlight Ann Pettifor, in the Financial Times and elsewhere—are suggesting that commodity derivatives could be the next big systemic risk, because they are so under-regulated. Global commodity markets involve an annual volume of at least $700 billion in buying and selling, with trillions in derivatives piled on to that.
Finally, if we grow the financial sector, we also grow corruption. The City of London is the global centre of corruption. If you do not want to believe me on that, I quote from a debate secured by my noble friend Lady Jones of Moulsecoomb. The noble Lord, Lord Evans of Weardale, chair of the Committee on Standards in Public Life, said that
“we have clearly, as a matter of policy, turned a blind eye to the perpetrators of corruption overseas using London for business”.—[Official Report, 13/10/2022; col. 156GC.]
If we grow the financial sector, we grow global corruption —that is the reality.

Baroness Lawlor: My Lords, it is an honour to address this House for the first time. I thank all who have so kindly helped in my  introduction—Black Rod and her team, the Clerk of the Parliaments, the Doorkeepers and your Lordships, as well as my two supporters, my noble friends Lord Balfe and Lord Black of Brentwood, and my mentor, my noble friend Lady Eaton.
I am grateful to the former Prime Minister, Boris Johnson, for nominating me, and pay tribute to his remarkable achievement in opening a new chapter in Britain’s constitutional and political history. One consequence, this Bill to revoke retained EU law and provide for a homegrown alternative, has won the broad support of the Opposition. It was anticipated in 2018 by the then Chancellor, Philip Hammond, now my noble friend Lord Hammond of Runnymede, who explained that the laws for such an important sector of our economy should be made in this country and under the jurisdiction of our courts.
The Bill reflects the continuity of recent political history and therefore links to my own working life, which began as a historian in Cambridge, where I had moved from my native Dublin. I later switched to contemporary policy, initially education, and then founded and established a think tank in London, Politeia, to bring academic and other specialist attention to broad matters of social, economic and constitutional policy, working with different parties and politicians. More recently, we have published material on the financial sector as part of our work on the future legal framework for trade in goods and services. I therefore declare a special interest in this subject and have written on it, although not at great length.
The Bill aims to revoke retained EU law for the sector and replace it with legislation that builds on the UK’s approach. Under it, UK regulators will have certain powers but also obligations to promote competition and medium to long-term growth. It envisages that the regulators will be accountable to Parliament via the House of Commons Treasury Select Committee and will report on their policy, consult, and engage with statutory bodies.
The Bill, therefore, is concerned in a practical way with a more abstract problem: the role played by officials operating the system under the laws made by Parliament. It aims for regulator accountability, something that will be music to the ears of many, often small businesses which are reluctant to act competitively because they fear they may fall foul of the regulator, although observing the law, and do not understand the mysterious application of the rules.
I hope we shall consider how the Bill’s approach to these two central regulator aims, accountability and competition, can be further strengthened, to avoid the erosion of one of the most dynamic sectors the world has ever known. Competition, the rule of good, clear law and a free economy encouraged businesses to start up and flourish in the City of London, a port and commercial centre to which merchants, shipowners, insurance underwriters and other entrepreneurs flocked, establishing banks and businesses. In this country, small entrepreneurs who staked their future on a start-up could enter the market knowing where they stood in law, and that the laws of this country would act as fairly for them as for established businesses. The Bill opens a new era in the story of this dynamic sector.  Providing competition and regulator accountability can be achieved, it will help the sector to be a world leader. I welcome this measure and its aims, with one caveat: that Parliament, in giving the regulators greater powers, does not give them a blank cheque.

Lord Blackwell: My Lords, it is a great pleasure to follow the excellent maiden speech of my noble friend Lady Lawlor, and to welcome her to the House. I have had the great good fortune to collaborate with her on policy issues over what now amounts to several decades in her role as founder and head of a major think tank with a well-deserved reputation for well-researched and detailed reports—perhaps the hallmark of somebody who started her career as an academic historian. I know that she has wise but spirited and forthright views on many topics, and I have no doubt she will bring that sharp intellect and independent mind to the business of the House. We look forward to her future contributions.
Before I speak on the Bill, I should note my role as a former chairman of Lloyds Bank, but I have no current interests other than as a continuing shareholder. I welcome the Bill, in particular the proposal to add competitiveness to the objectives of regulators, but my fear is that the Bill does not go far enough to redress the overly burdensome nature of the regulatory system that has built up over the last decade. I am not proposing that we turn the clock back to the inadequate regime prior to 2008—many of the reforms introduced then were necessary and are effective—but as my noble friend Lord Hunt of Wirral argued, the excessive regulatory burden on the financial services industry comes not so much from the regulation itself as from the overly bureaucratic way it has been implemented by the UK regulators.
This culture stems from the regulators’ overriding internal objective to avoid the risk of being blamed for failing to do something, with little incentive to balance that against the costs that their intervention may impose on the industry. I fear this tendency to gold-plate is fuelled by the current superficial nature of the parliamentary scrutiny by the Treasury Select Committee in the other place, which tends to focus on naming and shaming someone for anything that has gone wrong. Furthermore, the growth in staff numbers means that much of the regulation of major institutions is undertaken by relatively junior staff who are more likely to stick to a rigid interpretation of the regulatory rules because they simply do not have the confidence or experience to make balanced supervisory judgments.
The senior managers regime, for example, is, in principle, a sensible safeguard to ensure appropriately qualified people are in key industry roles and are held accountable. However, when a major institution has gone through a responsible and exhaustive recruitment process involving an external search firm, it is simply unnecessary and damaging to then have the appointment held up for further lengthy scrutiny by often far less experienced staff at the PRA and FCA. The overly forensic attempt by regulators to pin every mistake on some individual and require consequential penalties has had a corrosive impact, discouraging individuals from making difficult decisions or taking on difficult  roles that carry a risk of failure. It has led to a huge increase in bureaucratic processes and documentation, as managers seek to syndicate responsibility and cover their backs.
Another example is the tendency of the regulators to apply a one-size-fits-all approach, unwilling to recognise this may be disproportionate for some sectors or firms. The FCA’s fair pricing review is a case in point: in seeking to address certain consumer pricing practices, the review spread across the whole industry and imposed burdensome data collection on sectors such as the wholesale insurance market, where the participants are skilled professionals. Ring-fencing is another example where the overly rigid application of something which is in principle a sound idea has had a disproportionate impact on banks with relatively small non-ring-fenced activities. The FCA’s worthy objective of protecting the customer has been developed under the customer duty approach to the point where firms fear that even negligent or unreasonable customers will claim redress for buying a financial product that, after the event, causes them a loss. As a result, many products and helpful financial guidance have been withdrawn or repriced out of many people’s reach. This overly protective approach to customers needs to be replaced by a more even-handed objective of simply ensuring fair trading. Caveat emptor has been replaced too much by caveat venditor.
The downside of this overly intrusive regulatory approach is not just the direct costs but, more significantly, the diversion of management time and IT resources away from transforming businesses to better serve their customers. The introduction of competitiveness as a regulatory objective may be helpful to provide a counterbalance. I also welcome the provisions in this Bill for the Treasury to require regulators to review their activities and to set up independent cost-benefit panels, but these measures will not solve the problem without a fundamental shift in attitude, skills and culture within the regulators. I welcome the Chancellor’s commitment in Edinburgh to bring forward further measures to address some of these issues, including reviews of ring-fencing, the senior managers regime and the boundary between advice and financial guidance, but even then, I am not sure we will transform the regulatory approach without a more fundamental reshaping of the organisations and their accountability.
I think it is worth considering whether smaller regulators with fewer and more experienced staff would do a better job of providing supervision, with more considered judgments, and whether the benefit of having two separate regulators outweighs the burden of having two overlapping supervisory teams for major institutions. Finally, while I support the Bill, as other noble Lords have argued, given the powers it transfers to regulators it is important that it is accompanied by a more informed and balanced structure of parliamentary scrutiny that can also hold regulators to account for their new objective of the competitiveness of the industry. I ask my noble friend whether the Leader of the House has any plans to bring such proposals before the House.

Lord Balfe: My Lords, I draw attention to my entry in the register and I begin by welcoming my noble friend Lady Lawlor. I was one of her sponsors. I  am delighted to see her here; she will add huge intellectual firepower to our Benches. I hope not too much of it will be turned on me, as I do not think we agree very much on the European Union. I also thank my noble friends Lord Remnant and Lord Ashcombe, who will also add considerably to these Benches.
This is an interesting Bill. It is a good basis for a debate, and it follows a good deal of consultation. I am afraid that I disagree with my noble friend Lord Holmes, who is not in his place, on the subject of cash. Things move ahead. In 2020, I went to our local Turkish shop just after Covid started. I offered the shopkeeper some money and he said, “We’ve stopped accepting money, sir. We might get Covid.” I thought, “This is interesting.” Believe it or not, I stopped using money. Of course, the difficulty for poorer people is that they do not have access to credit or debit cards that they can just hand over all the time, so we need to retain the ability to pay in cash. But shops will maintain that for us, because they will want to continue to sell their goods, which is a pretty good thing.
As I see it, the growth of cryptocurrency, which I regret, is the next big scandal on the horizon—I thank the most reverend Primate for giving me a drink of water; it is jolly good to be given one by the Archbishop of Canterbury.
I warn us against cryptocurrency. We need to look at regulating it, because it is totally out of control, and it is meaningless. I discovered the principles of Warren Buffett before they were popular; if you want an investment, you should be able to see it, understand it and answer the question, “Does it do anything useful?” If you cannot get positive answers to all those points, you are likely to be investing in a dud. All these bubbles over the last umpteen years have been about things that do not exist. They did not have any benefits and most of them did not pay any dividends. You need to be very careful. I predict that anyone investing in cryptocurrency will come to regret it pretty shortly.
I welcome Clause 69 of this Bill, in particular the ability to develop credit unions further. We often forget the role that they play, particularly in providing secure finance for poorer people and in the trade union and working people’s movement. Anything we can do to strengthen credit union regulation, while making them dependable, is something to be gained. Enabling them to extend cautiously into hire-purchase agreements and insurance, and to lend to and borrow from each other, is extremely good. I hope that, as we pass this Bill, we can look carefully at how to support credit unions.
Finally, we need to look at the dangerous “buy now, pay later” phenomenon. Problems are already beginning to arise with the idea that you can go into a shop and say, “I’ll pay in three months.” This sector needs bringing under some sort of financial regulation. I hope that we can get some sort of outline during the course of this Bill of how we can get a regulatory framework.

Lord Mountevans: My Lords, it has been a great pleasure to hear the three maiden speeches this evening. The noble Lord, Lord Remnant, was a fellow  alderman in the City of London; I remember we all thought that he was first-rate material to be lord mayor, but unfortunately the City assumed him and took him away from us. We have seen tonight just how valuable his contribution will be. I equally congratulate his colleagues. Our House has been enriched this evening.
This is an important Bill, which I welcome and support. There is much that is valuable in it, such as enshrining that regulators exercise their new powers in the service of public policy objectives, set by Parliament, which maximise the industry’s contribution to society. I warmly welcome moves to build a robust regulatory regime for digital assets and to support digital innovation in distribution ledger technology, employing the sandbox technology that has been so successful in fintech. The introduction of references to economic growth and competitiveness has long been on the industry wish list.
Bringing the marketing of crypto assets under the existing financial promotion rules is highly desirable, as are the introduction of a new regulatory principle for the FCA and the PRA to have regard to the need to contribute towards achieving the UK’s net-zero obligations and steps to ensure that domestic legislation is amended to ensure that mutual recognition agreements can be fully implemented. This should reduce the cost of doing business and facilitate more competitive client service and offerings.
Some noble Lords have regretted that the Bill is not more proscriptive and wider ranging. However, the UK’s regulatory regime is a key factor in its perceived attraction as a global financial centre. With respect, profound changes are unappreciated and unhelpful. As we saw as recently as last autumn, it is important to be perceived as predictable, stable and strategic. Profound changes are to be avoided.
I am not an expert in regulation and have not worked in banking, insurance or, for example, the LSE. I was elected 11 years ago in the City and worked there for 45 years. From my contacts there, I think there is contentment with the Bill and its contents. These are steps in the right direction. It is a very important sector; as I and others have said, from research, it is critical that financial services flourish in this country.
I too would have liked to see more action on fraud and regulatory accountability, and opportunities for consumers have been missed. Hopefully, the Government can address this. The principal concern is the speed at which reform is proceeding. We have suffered the negative impacts of leaving the EU but are not succeeding in enhancing and improving our offer fast enough to compensate. Can the Minister say in summing up whether the regulatory organisations, with their immensely demanding and complex responsibilities, are fully equipped with the staff and resources required for the discharge of their duties and functions? This is more critical than ever at this time, as underlined most eloquently by the noble Lord, Lord Grimstone.

Lord Randall of Uxbridge: My Lords, a few hours ago, before this debate started, one of my noble friends saw that I was down to speak and said something  in terms similar to, “What on earth do you know about this?” He hit the nail on the head. That feeling has been only heightened by the quality of the speeches we have heard from noble Lords who really know what they are talking about, not least the three maiden speeches. I am delighted to have such erudite noble friends joining us on these Benches—I will probably have to keep quiet now, unless it is a subject that I know a little more about.
I say that I do not know much about this but, listening to some of the speeches, I realised that—as the noble Baroness, Lady Bennett, who is not in her place at the moment, said—I represent the man or woman in the street who does not understand these things but needs to because they are really important. As a former retailer, I have something to say on the subject of cash. Also, I say to my noble friend Lady Noakes, who is not here, and others that, if there is any spare cash she does not want, I have various charities—I will put a bucket outside and we can take it. That would solve that problem.
I declare an interest as a director of Peers for the Planet. I was going to emphasise the point about net zero and so on, but that has been amply discussed and there is no point in overdoing things. The noble Baronesses, Lady Sheehan and Lady Hayman, and others have mentioned this, so I will just add my voice to that. I can almost hear one or two of my noble friends in particular thinking that this will somehow be a burden, but it will not: these very institutions and businesses are asking for it to make sure that there is a level playing field.
However, there is one amendment I hope to table in Committee—unless I can persuade my noble friend the Minister that the Government need to take this on, which would save me the job of having to make a further speech on the Bill—and it is on deforestation. This amendment would echo one tabled by my right honourable friend Chris Grayling on Report in the other place, which had a great deal of cross-party support. My amendment would introduce a mandatory due diligence obligation for UK financial services to prevent the financing of commodities, businesses and activities that destroy climate-critical and biodiversity-rich forests, and indeed the lives of the local communities and indigenous peoples who depend on them. I tabled a similar amendment to the Environment Bill as it went through this House. It was a rather good amendment but, to my astonishment, the Government did not seem to agree with me entirely on it. I did cry myself to sleep that night, but I woke up again and thought, “There will be another opportunity”—and that is what I hope we will have in Committee, where I am sure the Government will realise the error of their ways and accept this, because it is incredibly important. I do not believe that Schedule 17 of the Environment Act is enough to stop the UK’s role in global deforestation.
I fully support the Bill but, like so many others have said, I am sure that there is room for improvement. It may not be down to me to do it; I think I have found the experts we need. I salute the Government for bringing this forward, and I salute my noble friend the Minister—not just because I want her to accept my amendment but because her stamina in sitting through this debate has been fantastic. With that, I think I will sit down.

Lord Carrington of Fulham: My Lords, it is a great pleasure to follow my noble friend Lord Randall, but I am not planning to follow him into the woods and forests and deforestation. I find myself in a situation which many noble Lords in this Chamber will have been in at various times of their career, where you have prepared a speech which is, frankly, brilliant, and you have all the points laid out with wonderful clarity, only to find that the second speaker makes your points, and the fourth speaker makes your points—I lost count after that. Everybody has talked about regulation, which is what I was planning to talk about. So, noble Lords will be extremely relieved to hear that my speech is going to be quite short, because nearly everything that can be said about regulation has been said—but, I have to say, not quite everything.
I do not have any interests to declare; I used to have interests to declare in financial services. I used to be a regulated authorised person by the PRA and the FCA, and I used to be the chairman of a very small bank, so I have had some experience of being regulated and recognise the importance of regulation. I recognise the very important role that the regulators play in keeping London as a premier financial centre. One of the principal reasons we are still a major financial centre in the world and manage to fight off the competition, which now comes from Europe as well as from New York and Singapore—China may well become competition again, but Hong Kong has largely disappeared —is our honesty and probity through regulation. That is very important, and we need to preserve it. For that reason, I also very much support the part of the Bill which gives the regulator further duties, particularly the duty in relation to international competition and growth, and to the green agenda. All this is very important, but it raises quite serious issues about what we want the regulator to do.
Perhaps I could digress for a moment and say a little bit about what I think regulators ought to be doing. This follows on a bit from what the noble and learned Lord, Lord Thomas, who sadly is not in his place at the moment, said earlier about large and detailed rulebooks being a disincentive to effective regulation. In fact, I would say—only he is a lawyer—that the great danger is getting the lawyers involved in regulation at all.
The point about regulation is that it is there to stop the villains and to stop people doing things that they should not do, but it is trying to do that in markets that are extremely fast-moving and highly inventive and innovative. A regulator that has rules that were set in stone 20 years ago and stretch from here to eternity will never catch those people. Indeed, there is a very strong argument, which I have seen written up by people who know much more about it than I do, that the great crash of 2007-08 was caused largely by regulators being hidebound by what they had seen in the past, rather than understanding what was happening and developing for the future—not just in this country, I have to say, but principally in the United States as well.
Regulators have to be very close to their markets and understand what is going on in them. They have to see the trades being done, know the participants  and hear the gossip. In all markets, whether traded or over-the-counter, the participants know who is good, who is stupid and who is bad. They may not get it 100% right but they get it pretty nearly right, which means that we have to get the regulation of the regulators right. That is desperately important.
I do not believe the Treasury can do it, because it is too close to the regulators. The Bank of England clearly is a regulator and cannot do it. The Treasury Select Committee, of which I have some experience, having been a chairman many years ago, cannot do it. We have to find a way of doing it which is effective. It may involve parliamentary committees, but my guess is that it will involve another regulator, to regulate the regulator. We need little fleas on the backs of big fleas to bite them. I am afraid that that is what we will have to do. We need to find a solution, because the regulators are becoming too powerful and too important, and they need to change.

Lord Moylan: My Lords, I was worried that my noble friend Lord Carrington of Fulham would take away the very last thing I might have said that has not already been said, but happily he has left a little scope for my contribution to the debate. I will start by saying something which has been widely said, by offering congratulations to all my noble friends who made their maiden speeches today and saying how welcome their contributions were, as their many contributions in future will be, adding to the quality of debate and the experience of your Lordships’ House.
There have been many points of consensus around the whole of the House as we have debated this, and I share those points. Among them is the astonishing lack of parliamentary scrutiny of what is in fact lawmaking. Whether this constitutes taking back control and whether it could be done better need to be explored in Committee. A second point of consensus is the need to ensure that a cash option remains available, not just for those who need it but for those who want to exercise it. There is broad consensus on that around the House. A third point on which there is consensus—I do not intend to put this too controversially—is that there appears to be a shared mild uncertainty around whether the current regulators are up to managing the new jobs that are about to be thrust upon them. That is something else that I am sure we will want to explore in Committee.
I would like to add one item, which I hope will command widespread support in your Lordships’ House. Over the last 20 or 30 years, retail access to regulated investments has practically dried up. It used to be the case that one could buy government bonds, gilt-edged securities, at the Post Office. It used to be the case that one could bid, non-competitively, for new issues of gilts through clipping a coupon in a newspaper—even the Daily Mail—and put one’s money into government bonds, as a safe, secure investment that one could hold over the long term. It used to be the case that new issues of equities were widely available to retail investors. All these had different risk profiles, but we need to trust that retail investors understand to a degree what they are doing—and they do.
Over the last few years, investors with money in their pockets which they would like to put into savings have been precluded by regulation from these markets and have instead put their money into dodgy schemes and things calling themselves bonds that have been marketed in a way that sometimes gives the impression that they are regulated by financial regulators. Sometimes there has been sufficient justification for that claim, such that we had to pass legislation only last year to authorise the Treasury to bail out the investors in one of the schemes—I believe it was called London Capital & Finance, but I may have that slightly wrong. We are saying that investors are going to be regulated out of nice, secure, sensible investments, but in effect encouraged to go into dodgy investments. It is all completely wrong.
A large part of it comes from the European Union’s prospectus directive. One thing it said was that, for investment in corporate bonds, the minimum denomination for a new bond issue has to be €100,000, and that denomination stays with the bond for the whole of its life. So unless you have a sum of roughly €100,000, you cannot buy. Most retail investors do not have that. The prospectus directive is included in Schedule 1 and is listed to go. It is vital that we put the retail investor at the heart of this.
Furthermore, treasurers are discouraged from giving a retail offer in new issues of equities because they have additional regulatory requirements to meet. We should be able to address those. All those things could be done if they were an explicit objective of the Bill and if the Government committed to doing them. The Investor Access to Regulated Bonds Working Group in the City has been talking to the FCA about this. The working group represents the industry; I have had some briefing from it, but have no interest to declare. There is a definite opportunity, but it needs to be taken up and pressed by the Government.
Finally, my noble friend Lord Forsyth of Drumlean mentioned the outrageous way in which politically exposed persons are dealt with in this country in the domestic regime. I put it to my noble friend on the Front Bench that this Bill, dealing as it does with financial regulation, would be the perfect mechanism for sorting out that problem once and for all, through any necessary amendments to primary or secondary legislation required, so that we cease to have the humiliating prospect of watching the Front Bench go off and beg the Financial Conduct Authority to treat us reasonably.

Baroness Fox of Buckley: My Lords, I welcome the three new Peers and their thought-provoking contributions so far to this crucial Bill. I want to focus on one fairly narrow but I think important consequence of an increasingly cashless society: that is, that a handful of mainly US tech giants now have unprecedented power over the public square.
Consider how any civil society organisation has to operate today. Consumer campaigns, pressure groups, NGOs, the third sector—all will be dependent on payment processes such as US fintech PayPal to operate in order to organise online payments for goods, services,  events, and to receive membership fees and donations, et cetera. Can your Lordships imagine if these digital corporates took it upon themselves to freeze assets and suspend accounts with no notice or explanation, all because some big-tech apparatchik disapproved of the aims of such organisations? Surely such censorious demonetisation would be a threat to democracy. Yet this is not some dystopian future—it is happening now. So I urge the Government to use the Bill to protect civil society organisations’ ability to conduct basic commerce regardless of their political views.
Noble Lords will remember the media coverage of events in September last year when PayPal deplatformed a number of UK organisations. Suddenly the Free Speech Union—I declare an interest as a member of the advisory board—the Daily Sceptic, Law or Fiction, and UsforThem, an advocacy group set up by mums who opposed school closures during lockdown, had no way to process membership or access their own funds, had no ability to raise money and were made to feel like criminals. All their processing services were just switched off abruptly, risking their whole financial viability. Toby Young, who heads up two of the targeted organisations, explained at the time:
“PayPal’s software was embedded in all our payment systems, so the sudden closure of our accounts was an existential threat.”
Indeed, even PayPal’s co-founder Peter Thiel told the Free Press in December:
“If the online forms of your money are frozen, that’s like destroying people economically, limiting their ability to exercise their political voice.”
Such financial censorship reminded me of when the Canadian Prime Minister Justin Trudeau froze the Freedom Convoy protesters’ bank accounts last February. That was shocking, but at least it was clearly a political act. The problem when payment process organisations defund based on content is that they are often evasive and opaque about who it is targeted and why. PayPal gave contradictory and vague explanations last September, initially citing its acceptable use policy associated with criminality and hate speech, and later telling the Times that the accounts were guilty of misinformation about vaccines. Few were convinced. Miriam Cates MP told the other place:
“It is … hard to avoid interpreting PayPal’s actions as an orchestrated, politically motivated move to restrict certain views within the UK”,—[Official Report, Commons, 7/12/22; col. 430.]
or, in the FSU’s case, even defending those expressing such legal but dissenting views.
After high-profile press coverage and Members from both Houses—across parties and of none—causing a fuss, PayPal eventually backed down, reinstated the accounts and denied that there was any political interference. However, there is no room for complacency. When Sally-Ann Hart MP proposed an amendment to this very Bill in the other place, seeking to legally prevent financial service providers refusing to provide services if related to the exercise of the right to free speech, the Minister Andrew Griffin gave a robustly positive response. He stated that the Government respected
“the balance of rights between users and service providers’ obligations … whether of the Free Speech Union, the trade union movement, law-abiding environmental movements or anyone else expressing lawful views.”—[Official Report, Commons, 7/12/22; col. 395.]
However, he seemed rather reluctant to agree with the need for primary legislative change and stated that the PayPal incidents did not represent a wider pattern. I beg to disagree.
We need to look at what has happened in the US over recent years—and think about whether it might happen here—where big tech companies regularly use defunding to regulate speech, so much so that in June 2021, a large coalition of US civil liberties groups wrote to PayPal and its subsidiary Venmo asking for transparency, due process and clarity behind this escalating practice of economic limitations on multiple varied accounts, from WikiLeaks to News Media Canada’s payment to submit an article about Syrian refugees for an award. The coalition, comprising eminent organisations such as Article 19, the ACLU and the Electronic Frontier Foundation, never even got a reply from PayPal. Also, less high-profile instances of deplatforming dissenting views are happening in the UK, for example with Patreon, CrowdJustice and GoFundMe affecting our citizens. What is more, the majority of major payment providers grant themselves the right to block accounts of those whose views clash with Silicon Valley’s increasingly ideological corporate values.
I intend to table an amendment to say that, while I understand that private companies have a right to choose who they do business with and should be vigilant about fraud and illegal transactions, they should never discriminate on the basis of an organisation’s political, philosophical or religious beliefs. This Bill might be a place where we can put that right.

Lord Northbrook: My Lords, first, I declare an interest as a consultant to an FCA-regulated investment management firm. Overall, I strongly welcome this Bill, as do important UK financial institutions, including the Investment Association, UK Finance, TheCityUK and Linklaters’ Financial Regulation Group, to name but four.
Politically, the Bill seems to be generally supported by all major parties. I particularly welcome the provision to establish a regime to regulate stablecoins. I also like the idea of bringing in measures to allow regulators to reduce regulations in order to enable technological innovation in a sandbox. I also approve of the measure allowing regulators to make rules for entities deemed to pose systemic risks to the UK’s financial markets. As the Prime Minister said in his Back-Bench speech at Second Reading:
“Why does all this matter? It matters for three specific reasons. The first is jobs. The industry provides more than 1 million jobs, and not just in London and the south-east; two-thirds of those jobs are in places such as Southampton, Chester, Bournemouth, Glasgow, Belfast, Edinburgh and Leeds. It is incredibly important. Secondly, it is one of the most important industries for our economy in terms of contribution to our GDP and tax revenues, and it is something that we as a country are genuinely world-class at.”—[Official Report, Commons, 7/9/22; col. 292.]
I recognise that the City is now in a very different place from where it was in 2016. The consensus view is that the ship has now sailed on regulatory equivalence with Europe. However, the fact is that, since 2018, the volume of financial exports to the EU has fallen by 19% in cash terms. Some £1.3 trillion of UK assets have reportedly moved to the EU and there has been  little progress on securing trade deals for our financial services around the world—although Switzerland was mentioned earlier.
Still, in 2021, exports of financial services to the EU were worth £20.1 billion—33% of all UK financial services exports. So is it wise just to repeal all the 200-plus pieces of retained EU law en bloc rather than identifying which are helpful and necessary? Also, the sector is disappointed that the Government have so far failed to finalise a memorandum of understanding on regulatory co-operation or negotiate with the EU for the mutual recognition of professional qualifications for our service sectors. In her winding-up speech, will the Minister tell us what impact she believes this Bill will have in securing these important agreements with the EU and boosting financial services exports more generally?
I move on to what has not been included in the Bill. I agree with my noble friend Lord Balfe: I feel that the Bill lacks ambition in its lack of support for the mutual and co-operative sector. Although Clause 63 contains some welcome and long-overdue provisions, such as enabling credit unions to offer a wider range of products, the Bill does little to address the outdated regulatory regime faced by credit unions, building societies and co-operative banks. We have seen numerous building societies threatened with demutualisation in recent years, while the number of mutual credit unions has plummeted by more than 20% since 2016. Unlike the USA—and many other European countries, as I understand it—the UK is uniquely lacking in co-operatively or mutually owned regional banks. That lack of diversity in the financial services sector has had bad consequences for financial inclusion and resilience, with many desperate families forced into the arms of unethical lenders.
Next, like the noble Lord, Lord Hunt of Kings Heath, and other noble Lords, I find it disappointing that the Bill fails fully to address the growing problem of financial fraud. Clause 62 only partially addresses the issue. It enhances protections for victims of authorised push payment fraud, which, according to the Labour Treasury Minister in the other place, quoting UK Finance figures, reached an all-time high of £1.3 billion in 2020. The Government in the other place promised a review without giving a timescale, but more immediate action is needed. The Bill ignores the fact that digital-savvy criminals are increasingly exploiting a range of financial institutions such as payment system operators, electronic money institutions and crypto asset firms to scam the public. According to UK Finance, in 2020, 45% of the £1.3 billion was payment card fraud, while 38% was authorised push payment and 16% was remote banking.
Last November, our House of Lords Fraud Act 2006 and Digital Fraud Committee released a report stating that the Government should introduce a new corporate criminal offence to ensure that big tech platforms and telecom companies tackle financial crime. While online platforms will face a duty of care to protect their users from fraud under the Online Safety Bill currently going through its stages in the other place, it does not cover telecoms and other related sectors:
“‘It’s a very good step but I do think that more needs to be done,’ said Sian McIntyre, a managing director at Barclays UK, including requiring tech companies to publish data on the nature and volume of scams on their platforms.”
I support other noble Lords’ views on the limitation of Treasury Select Committee scrutiny, general clarity on crypto regulation, regulators’ requirements to focus on international competitors, problems of buy now, pay later, and the opportunity to still have a cash option. In summary, I welcome the Bill and look forward to scrutinising it further in Committee.

Viscount Trenchard: My Lords, it is a pleasure to follow my noble friend Lord Northbrook. I thank my noble friend Lady Penn for her impressive introduction of this Bill and declare my interest as set out in the register as a director of two investment companies. I welcome the Bill. I wish to place on record my strong objection to the imposition of a five-minute so-called advisory speaking time at Second Reading. I add my congratulations to my noble friends Lord Remnant, Lord Ashcombe and Lady Lawlor on their excellent maiden speeches.
I was a member of the Joint Committee on Financial Services and Markets, which reported in 1999 on the need for the Financial Services and Markets Act 2000. At the time, we did not appreciate how much of the responsibility for framing financial services regulation would be transferred to the European Commission, as Union competence steadily increased its reach. We were powerless to prevent the entry into force of AIFMD in 2013. We did not resist the adoption and eventual entry into force in 2018 of MiFID II, which requires fund managers and brokers to set separate charges for trade execution and research, and fund managers to pay for research themselves or agree a separate research contract under which they may recover their costs. These and other legacy EU regulations, such as PRIIPs and its requirement that companies produce consumer-friendly kids, have had the opposite effect on consumers from that which was expected.
A return to the FSMA 2000 model, balancing responsibilities between Parliament, government acting through the Treasury and the regulators, makes a great deal of sense. I was never sure that the decision following the financial crisis of 2008 to create the PRA as a second regulator, which was neither an independent regulator nor fully a department of the Bank of England, was the right one. The creation of the FCA, with its one strategic objective, that markets function well, and three operational objectives, which include a competition objective but one limited to promoting competition in the interest of consumers, has contributed to the emergence of a culture within the institution which is overcautious and generally perceived by the industry as anti-innovation. Participants in London’s insurance markets have explained to me that this is the principal reason why our share of the global insurance markets is stagnant at around 7%, whereas those of other jurisdictions such as Bermuda and Singapore are growing.
From the point of view of your Lordships’ House, Clause 36 of the Bill, governing engagement with parliamentary committees, is very unsatisfactory. It is very far from even-handed between your Lordships’ House and another place. I question whether the Treasury Committee, as it currently operates, can conduct  the required level of oversight. Surely a Joint Committee of both Houses should be established for this purpose. We need a committee resourced well enough to replicate the activities of the ECON committee of the European Parliament.
I welcome the Government’s decision to act in accordance with a recommendation of the Listing Review, undertaken by my noble friend Lord Hill of Oareford, to create a competitiveness and growth objective. Clause 24(2) makes clear that this objective is secondary. However, as I mentioned, the FCA has one strategic objective and three operational objectives. Could my noble friend the Minister please inform the House whether the new competitiveness and growth objective is to be a secondary strategic objective or a secondary operational objective? Could she explain why the Government does not recognise that, if the FCA’s new objective is only secondary, it will not be effective in changing the FCA’s culture and behaviour to the extent necessary to achieve the Government’s ambition for the UK to be the world’s most innovative and competitive global financial centre?
The regulators are required to report on how well they are performing their new objectives, but Clause 26 suggests that the FCA sets its own homework and then marks it. Unlike the PRA, it is not required to undertake public consultation. Could my noble friend the Minister tell the House whether she thinks that the empowerment of the FCA to regulate Stock Exchange listings through the designated activities regime will make admissions more, or less, expensive and cumbersome than they have become over the past 14 years—during which, as my noble friend Lord Hill pointed out, the number of companies listed on the London Stock Exchange has declined by 40%?
I welcome the Bill and look forward to working with other noble Lords to make it a better one.

Lord Lilley: My Lords, I begin by paying tribute to my noble friend Lord Lawson. As his researcher in my spare time before I entered Parliament, then his PPS for four years, then his Economic Secretary to the Treasury for two more, I learned my politics at his feet. I also learned to admire his immense intellect, his sound judgment, and—what may be less well known to others—his incredible, uncanny insight into human psychology, enabling him to forecast in advance the reactions of individuals and the public to events long before they occurred. When I saw him in the summer, his intellect, judgment and insight were undimmed. They will be sorely missed in this House.
I want to make five simple points. First, the four major global financial centres, London, New York, Hong Kong and Singapore, are all based on common law, as are the three newest players, Dubai, Abu Dhabi and Astana. By contrast, the largest European financial centre, based on civil law code, is Frankfurt, which clocks in at number 18 as the most significant globally. That is not a coincidence; it is because common law is uniquely suited to financial markets. In recent decades, layers of civil law code have been added to Britain’s financial system, so the objective of this Bill, to return rule-making to a more common-law-based approach, is very welcome.
Secondly, it is not clear whether the Bill will achieve that objective. Historically, the common-law approach involves laws and regulations made by Parliament and explicated by the courts by the accumulation of precedents. The Bill at present will effectively hand over rule-making to independent regulators, with minimal accountability to Parliament or involvement of the courts.
Thirdly, the economic analysis of regulation is a comparatively new discipline, but its seminal conclusion is clear: we cannot rely on the beneficence of regulators. Left to their own devices—and I stress this—regulators regulate in the interests of regulators, without accountability. That is why, in practice, they mind their own backs by taking a bureaucratic, box-ticking approach to every decision, rather than focusing their resources on areas of genuine concern. As a result, bona fide businesses face pointless delays to obtain the least contentious decisions; regulators refuse to offer advice on how they will apply specific rules in specific cases, leaving businesses to face uncertainty and risk; and regulators refuse to publish reasons for their decisions, with the result that there is no coherent body of case law for firms to follow. Finally, regulators tend remorselessly to extend their remit, increasing their own importance.
I understand that amendments are likely to be proposed to make regulators more accountable to Parliament, or at least to a powerful Joint Committee of both Houses. Having chaired the Joint Committee scrutinising legislation following the great financial crisis, I can vouch for how much value the Members of this House give to such committees, as well as those of the other House, to which I then belonged. It is also important that there are amendments to require regulators to apply common law disciplines and to enable tribunals to ensure that a body of publicly available case law develops to give practitioners greater legal certainty. I am predisposed to support such amendments, as I hope will the Government.
Fourthly, I understand that the regulators have been arguing that their independence is sacrosanct. To quote Mandy Rice-Davies, “They would say that, wouldn’t they?” Of course politicians should not meddle in how regulators apply rules to specific practitioners, but the Bank of England was given independence to set interest rates for a very specific reason: because the timing of interest rate changes is electorally sensitive. There is no equivalent reason to allow the financial regulators to be immune to influence and oversight from Parliament or the courts.
Fifthly, finally and rather differently, there is no reason to extend the regulators’ competence to include climate change. The sensible path to net zero, which we have adopted in this country, is to reduce demand for fossil fuels, not to reduce their supply. If businesses overinvest in producing fossil fuels ahead of declining demand, they will lose money. That is their problem, not the regulators’. If the UK unilaterally bans investment in fossil fuels, which would be a bizarre thing to do given that we do not ban their import, other people will supply them, both here and abroad. If the world collectively restricts the supply of fossil fuels faster than we phase out demand, there will be shortages, prices will shoot up and fossil-fuel producers will make enormous profits; we will have done to ourselves  what Putin has just done to the world. Giving regulators a climate objective would be either pointless or disastrous. In all other respects, I support the Bill.

Baroness Kramer: My Lords, I begin the first of the winding-up speeches by saying how much I welcome our three maiden speakers and by remarking on the excellence of their speeches. I look forward to their further contributions.
This a significant Bill. There are aspects of it that I strongly support. I do believe that we should tailor regulation to the UK market, although I am of the community that thinks this refers much more to the efficiency of the way that rules are applied than to the removal of gold-plating. I hope that I do not misspeak for the noble Lord, Lord Mountevans, when I say that the absence of profound change would be rather welcomed by most of those I talk to in the financial services industry. I support protection for access to cash, protection against push payment scams, greater scope for credit unions and beginning attempts to regulate crypto assets. In some of these areas, we on these Benches will have amendments to strengthen those changes.
There are missed opportunities. My noble friend Lord Sharkey is leading for us to introduce an effective duty of care, unlike the box-ticking of the consumer duty, and to adjust the regulatory perimeter to properly include small businesses. My noble friend Lady Tyler will lead for us on an objective of financial inclusion, as well as dealing with issues around access to cash and to services. My noble friends Lady Northover and Lady Sheehan are leading on strengthening the net-zero and biodiversity elements of the regulators’ roles. And I think the House is now prepared to understand that my noble friend Lady Bowles is proposing changes to make the regime far more effective at enforcement, including against fraud; to drive regulatory efficiency; and to significantly improve monitoring of systemic risk and financial stability across the financial sector. I suspect that yet more amendments will be coming from her pen.
All of us on these Benches are concerned with accountability. I was going to list everyone who spoke on this issue, but I would have to read out virtually every name engaged in the debate. From my perspective, powers that had democratic oversight in the EU system will be transferred wholesale to regulators with pretty much no engagement with a meaningful democratic process once this Bill is passed. As many have said, the Treasury Select Committee has taken steps to improve its oversight, but it is far too little and I agree with those who say that it is retrospective, which is not what we need. I look to my noble friend Lady Bowles in particular to craft a series of amendments.
In this Second Reading, I want to take a step back and ask to what extent the changes introduced in this Bill, combined with what the Chancellor calls “the Edinburgh reforms”, which are, of course, largely coming through secondary legislation, reintroduce risks to the sector and to financial stability that existed prior to the 2007 crash and set us up for the next major crisis. The financial crash was driven by the deliberate disguise of risky assets and irresponsible management  by major banks. Consumers endured abuse from extensive mis-selling and, astonishingly, Libor was corruptly manipulated for at least a decade.
Today, we have a shadow banking system—I have to thank the noble Baroness, Lady Hayman, and the noble Lord, Lord Butler; I am afraid this glass of water will not turn into wine, as happened for the noble Lord, Lord Balfe—which now almost matches the formal banking system in size and has embedded new levels of risk. I think LDI, is an example and I say to the noble Lord, Lord Altrincham, that it was the leveraging of those instruments using a loophole that caused the problem. Give them an inch and they take 10 miles, and it continues to be true of the sector.
I accept that some change to Solvency II makes sense, but many insurers see its replacement by solvency UK, which will be empowered by this Bill, as the gateway to extensive investment in high-risk illiquid assets, sub-investment grade—I have talked to the industry—without compensating capital requirements. I am very concerned at the weakening of the matching adjustment. I think the Government are mesmerised by the hope that these investments will fund upscaling of new companies, net-zero projects and high-risk infrastructure with somehow no real risk involved. I suspect a lot will go to remuneration and dividends, frankly. I am constantly referred to the Canadian Pension Plan Investment Board as evidence that a fund can safely invest in high-risk illiquid assets without being burned. I quote from the S&P Global Ratings Review of the CPP:
“The rating also reflects the agency’s opinion of a moderately high likelihood that the Canadian government would provide extraordinary support in the event of financial distress.”
I wonder how much the UK taxpayer wishes to stand behind our insurance industry—and in many senses it also involves the pension industry—with a moderately high likelihood of extraordinary support in the event of financial distress? Taxpayers cannot keep bailing out the financial sector.
The financial services sector, especially the City, is also aggressively behind the international competitiveness objective in this Bill. Many want it elevated to a primary objective. This was discussed by the noble Lord, Lord Bridges, and the noble Lord, Lord Remnant, in his maiden speech. Actually, I may do injustice to the noble Lord, Lord Remnant, on that. He may have said that he is happy with it as a secondary objective. They believe that the regulators—again, I talk with the industry extensively—will find that this objective combined with the mutual recognition agreements in trade negotiations, which, of course, do not come to Parliament for approval, will force UK regulation to be lowered to match that of trade partners, and I suggest that that is very dangerous.
I quote from Paul Tucker, former deputy governor of the Bank of England, in evidence in November to the Economic Affairs Committee:
“please do not, as the UK Parliament, give the Prudential Regulation Authority a competitiveness objective. Someone would only do that if they really disliked the City of London and wanted to damage the City of London in the long run ... I can summon the  
We are of course bleeding financial services business to the EU and other global financial centres. Financial services exports to the EU are down more than 6%, and it will get seriously worse when euro clearing leaves in 2025, but regulatory arbitrage is not the answer. I am with those who are convinced that a strong rulebook is essential to the reputation and success of the financial services industry as well as the necessary bulwark against a repeat crisis which would create years of damage to the UK economy and bring many further years of austerity.
But the Chancellor has gone farther. The Edinburgh reforms set up processes to weaken the ring-fencing of core retail banking from investment and international banking. I urge the House to stop this in its tracks. Like the most reverend Primate, I sat on the Parliamentary Commission on Banking Standards for nearly two years. Few things fuelled irresponsible behaviour more than the banks’ ability to use what they saw as the free and insured money sitting in personal bank accounts to roll on high-risk casino banking. Add to that the lifting of the cap on bankers’ bonuses and we set up actual incentives for another risk and greed-fuelled crisis.
The Edinburgh reforms also set up a process to change the senior managers and certification regime. My dispute with the SMCR is that the FCA has made it into a box-ticking exercise that does not fulfil its primary purpose to act severely against individual senior managers who fail in their duties, either deliberately or through mismanagement and incompetence. My noble friend Lord Sharkey discussed this. Instead of returning that regime to its original purpose, the industry is very confident that the Edinburgh reforms will remove individual responsibility completely. I suggest that Members of the House visit the evidence given to the commission. Virtually every senior manager, including the CEOs, pleaded a mix of incompetence and collective responsibility to explain away the failures in their institution and why they could not be held to account.
This is a Bill we have to get right. Risk applies asymmetrically in the financial services industry. In the 2007-08 crash, almost no senior manager or executive was hurt and, indeed, almost every one of them walked away with years of bonuses based on what were really false profits. The taxpayer and ordinary people, coping with the austerity that followed—never mind the funds that had to go into the banking system—bore the real cost. On the Parliamentary Commission on Banking Standards, we were very afraid that after a few years the lessons of the crash and the abuse would be forgotten and the new safeguards watered down. This is an industry that knows how to promote itself and speaks with a great sense of invincibility. As we work our way through the Bill, we should keep at the front of our minds the concern that those safeguards, which were so necessary, will be pushed to be watered down.

Lord Tunnicliffe: My Lords, I thank the Minister for introducing the Bill and for the positive engagement we have had with government. Today has been a constructive and considered debate, and I congratulate the three maiden speakers.
In the other place, Labour gave broad support to the Bill. Some regulatory divergence with the EU, and a more outcomes-based approach to regulation, will create some important opportunities for industry. For example, long-awaited reforms to Solvency II, if done well, will unlock capital for investment in productive assets, including those that will be needed for the green transition.
However, my party’s support had one glaring exception: the intervention power. The Government mooted this and then wisely abandoned it following widespread condemnation. This was not just the Opposition opposing it, as noble Lords might expect. The Treasury Committee, the Bank of England, the FCA and every serious City stakeholder and commentator expressed profound concern about the risk of any interference with the independence of our regulators. The foundation of the City of London’s success as a financial centre is precisely its robust regulation, shielded from the political caprices of Governments of all stripes.
Our world-class financial services sector needs its reputation as a safe and stable place to do business. The Prime Minister and his Treasury threatened that when they flew their amateurish intervention power kite, gambling with over 1 million UK jobs. Now that this threat has been removed, I am happily able to support what has made it into the Bill, with a number of important changes.
As has been outlined, the Bill implements the outcomes of the future regulatory framework review and attempts to set out a clear direction of travel for financial services regulation now that we have left the EU.
I welcome Chapters 1 and 2, which will allow us to both revoke remaining retained EU law and strengthen the regulators’ powers and oversight of important areas, such as central counterparties and financial promotions, now that we have left the EU. I look forward to scrutinising these measures in detail in Committee.
Clauses 21 and 22 allow for the regulation of stablecoins. Crypto is no longer a niche investment but is widely popular with retail investors. Many currencies are big enough that their collapse can cause systemic shocks in the “real economy”. Can the Minister give an update on the Government’s current strategic approach to crypto, in light of the FTX collapse? Clause 24 establishes new regulatory objectives of medium-term growth and competitiveness, which will help to tackle our chronically stagnant economy.
I believe that these measures have successfully struck a difficult balance between protecting financial stability and unlocking the potential of the sector to boost the UK’s growth and international competitiveness. I have to note serious concerns from stakeholders, however, that the new objectives risk encouraging bad behaviour or, indeed, that they do not go far enough. As we know from the excesses of the 2008 financial crisis, there are unscrupulous actors in the system.
If, in pursuit of growth and competitiveness, the PRA even slightly deprioritises
“promoting the safety and soundness of PRA authorised persons”,
or if the FCA deprioritises
“ensuring that the relevant markets function well”,
consumers and the markets will once again be under serious threat. It is a fact that the last crisis is now a relatively long time ago and many have forgotten the extent to which the taxpayer was required to save the London financial system and, indeed, to a large extent, the world’s financial system. I would therefore appreciate it if the Minister could assure us that the regulators’ primary objectives will and must remain their utmost concern and, crucially, of the mechanism by which she will guarantee this. If not, we will consider tabling or supporting a Committee stage amendment to this effect.
Clauses 27 to 46 provide for the accountability of the regulators to the Treasury, Parliament and the public. Clause 36, in particular, will formalise the role of the Treasury Committee.
I commend the hard work of all the parliamentarians who made efforts to secure these clauses. This is a positive step and good for the scrutiny of government policy. I was involved in the 2021 efforts to introduce scrutiny when we got relatively limited support. I am therefore pleased to see the extent of support for improved scrutiny in today’s debate. It is particularly important that there should be such consensus on this point. We may have to move well beyond equality with the Commons in our activity towards a firmer, more powerful approach, which will need to be of high quality and properly supported; the essence of much of today’s debate has been about balance.
I therefore also ask the Minister to give the House of Lords’ expert Economic Affairs Committee an equal statutory scrutiny role—or, indeed, as I have just said, going beyond that. Although it is welcome that regulators will have to reply formally to any responses the EAC gives to their consultation, I will look to amend the Bill to ensure that this House is given a similar, thorough oversight role.
As concerns the rest of this section, new powers allowing greater involvement from government in the FCA’s and PRA’s rule-making process must be carefully balanced with the need to protect their independence, which has already been threatened by the intervention power. I know that HMT works closely with the regulators informally, but I can see how a statutory right to request rule reviews and reports, on any matter and at will, could tempt overreach by an activist Chancellor. This will need careful scrutiny once again from your Lordships’ House. I would appreciate an assurance from the Minister that these new powers will be used only sparingly. An example of when she imagines they might be necessary would be useful.
Turning to what is not in the Bill, a lot of these provisions, though important, probably feel quite distant and specialist to members of the public. This is not so regarding access to cash. I strongly welcome Clauses 51 and 52 which will finally, after years of delay, protect cash access. Regrettably, the Bill does nothing to protect face-to-face banking services, nor free-of-charge access to cash. The most vulnerable in our society depend on these for financial advice and support. Again, this is not a niche issue, as 15% of transactions by volume are still made in cash. I recognise the forces referred to by the noble Baroness, Lady Noakes, that will bring about the eventual end of cash, but we are not there yet. Cash will be very important for at least a couple of decades and it will need preserving in law.
However, because almost 6,000 bank branches have closed since 2015, small business owners in particular have to travel longer distances to deposit any cash they accept. This is a huge disincentive for them to accept cash; consequently, we see more and more businesses now being unwilling to do so. We must ensure that small businesses can deposit cash easily, which is why we will table an amendment guaranteeing a minimum level of free-of-charge access to cash services for the UK’s SMEs. I hope the Minister will agree that both face-to-face and free-of-charge cash access are absolutely crucial for financial inclusion. I therefore hope we can work with her and colleagues across the House to implement robust guarantees.
It is equally disappointing that the Bill misses the opportunity to address the gigantic problem of financial fraud, which costs the economy over £1 billion every year. The Bill hints at it with Clause 68, which enhances protection against authorised push payments. On this measure, reimbursement is eligible only for Faster Payments system payments and not others. The reason for this demarcation is not entirely clear. I would appreciate any light the Minister can shed.
Scammers are outpacing the Government. As the last National Fraud Strategy came out 12 years ago in 2011, since when vast billions have been lost by this Government to Covid fraudsters, I would have thought action in this area would be a quick win. I urge the Minister and her officials to think about how the Bill might be used to be proactive on this. Your Lordships’ House can expect an amendment from us to compel the Government to produce a national fraud strategy for this decade, and update it at least every five years.
Another area in which we feel the Bill lacks ambition is support for the mutual and co-operative sector. Clause 69 contains some long-overdue provisions, such as enabling credit unions to offer a wider range of products. But the Bill does not otherwise address the outdated regulatory regime faced by credit unions, building societies and co-operative banks. We have seen numerous building societies threatened with demutualisation in recent years, while the number of mutual credit unions has plummeted by more than 20% since 2016.
The UK stands apart from other advanced economies. We lack a strong system of mutually and/or co-operatively owned regional banks. A lack of consumer choice in this area has driven many people to high-interest or unethical borrowing options and is part of our financial inclusion problem. I venture that a helpful first step might be to require the FCA and PRA to report on how they have considered the needs of credit unions, building societies, mutuals and co-operative regional banks. Does the Minister agree that these models deserve parity of esteem and should be encouraged? Would she be sympathetic to an amendment to facilitate this?
Furthermore, the Bill has very little to say about green finance. Clause 25, which codifies the regulators’ responsibility under the Climate Change Act 2008, is welcome. However, the Government have promised much more radical action. It was suggested that the UK would become the world’s first net-zero financial sector.  In contrast, there is still no updated green finance strategy after years of promise. The Government have had enough chances to produce it, to introduce sustainability disclosure requirements and, particularly importantly, to produce a plan for green taxonomy. I fear it now falls to this House to help the Government by amending this Bill.
Finally, turning to the Edinburgh reforms, if amendments are to be introduced through the Bill to facilitate these proposals, it is essential that the House has a full appreciation of the reforms. The Government should produce a comprehensive briefing document to avoid the requirement to move many probing amendments to clarify government intentions. We must fully understand the package and, in particular, the extent to which it may enable a weakening of the senior managers and certification regime, or a reversal of the essential ring-fencing measures designed to protect the UK from the catastrophe of a financial crash. We must keep reminding ourselves that the UK’s financial stability is essential to encouraging investment and growth. To abolish ring-fencing and the stability it brings to facilitate growth is a contradiction in terms.
In sum, I hope I have made clear my support for the Bill, which marks an important step in the journey of our financial services sector outside the European Union. In this debate there has been an amazing degree of consensus. Outstanding issues in each of these areas have, in general, been issues of balance. No serious, obvious political divisions have arisen—I even found myself agreeing with the noble Baroness, Lady Noakes, so it could not have been too bad. I ask the Minister to recognise that there will be a need for significant change to adjust those balances and that force, I hope, will come from overwhelming consensus.

Baroness Penn: My Lords, I thank all noble Lords who have spoken in this debate for their valuable contributions, which reflect the breadth and significance of this Bill. I will try to get through as many points as possible but, looking at the stack of papers before me, I think I have been overambitious—so I will dive straight in.
Turning first to the future regulatory framework review, which is a once in a generation opportunity to update our rulebook and tailor it to UK markets, as I have said before, the Bill revokes retained EU law relating to financial services so it can be replaced by a coherent and agile approach designed for the UK, building on the FiSMA model. I reassure my noble friend Lord Hodgson that, when the repeal of retained EU law commences and the Government lay secondary legislation to replace it, the Treasury will fully assess the impacts of the exercise of these powers in secondary legislation. We will conduct impact assessments and post-implementation reviews in line with the Cabinet Office guidance and the Government’s Better Regulation Framework.
My noble friend and the noble Lord, Lord Sharkey, probed further on the process for replacing the different regulations and Clause 4 and the procedures associated with it. The affirmative procedure applies to statutory instruments made under Clause 4, except where the power is used to restate either EU tertiary legislation  or legislation which was originally made under the negative procedure, or where there is no modification of retained EU law. In this case, it is appropriate to follow previous precedent and apply the negative procedure. EU tertiary legislation is technically complex and the same is true where the negative procedure was used for UK statutory instruments—these were technical SIs. Given the thousands of pages of retained EU law to deal with, as has been referenced in this debate, it is important that we ensure that Parliament can focus on potential policy implications from the changes we may make to retained EU law.
I turn now to the debate on the objectives for the regulators which are the starting point for the framework we will be taking forward. Those objectives are set out in FSMA and are amended in this Bill in two key ways: the introduction of the secondary objective on international competitiveness and medium and long-term growth, and a new regulatory principle to have regard to the Government’s net-zero commitment. The noble Lords, Lord Sharkey and Lord Tunnicliffe, the noble Baronesses, Lady Kramer and Lady Bryan of Partick, and others raised concerns about ensuring that the secondary objective does not dilute the regulators’ focus on the primary objective, whereas many other noble Lords spoke in favour of the new secondary objective. Noble Lords such as my noble friend Lord Bridges were perhaps concerned that it may not go far enough. The Government believe that having growth and competitiveness as a secondary objective strikes the right balance between providing a new focus on advancing medium to long-term growth and competitiveness while maintaining the regulators’ focus on their existing objectives. It provides a clear hierarchy of objectives to consider, and the regulators will need to balance those objectives and consider them in a way which respects that hierarchy.
The PRA’s existing secondary competition objective provides the model for how that hierarchy operates: the regulators must advance their secondary objectives in so far as that is compatible with their primary objective. However, with the introduction of the secondary objective, the Government expect that it will fulfil the expectations of many of those who have spoken in this House in support of delivering a step change in how the regulators approach growth and competitiveness, resulting in more proportionate rule-making while still ensuring high regulatory standards. As my noble friend Lord Remnant said in his excellent maiden speech, the UK is not unique in giving its regulators such an additional objective. He demonstrated the expertise that he will bring to this House, particularly in debates on this Bill.
The noble Lords, Lord Sharkey and Lord Butler, and the noble Baroness, Lady Kramer, spoke of the context for some of their concern around the introduction of the secondary objective and the previous structure we had for regulating financial services prior to the financial crisis. The FSA’s objectives prior to the financial crisis were market confidence, public awareness, consumer protection and the reduction of financial crime. The FSA did not have a financial stability objective. Noble Lords are right that one of the regulatory principles that the FSA had to take into account was the international character of financial services and markets, and the  desirability of maintaining the competitive position of the United Kingdom. However, the post-crisis reforms focused on the institutional design and allocation of responsibilities, with the FSA abolished and replaced by both the PRA, which focuses on the safety and soundness of the financial sector, and the FCA, which focuses on market integrity, consumer protection and competition. The Government’s view is that those post-crisis structural reforms, along with the regulators’ existing primary objectives, mean that the environment in which the regulators are considering competitiveness is very different from that which has gone before.
The noble Baronesses, Lady Hayman, Lady Sheehan and Lady Northover, and the noble Lord, Lord Vaux of Harrowden, questioned the Government’s decision to make the net-zero commitment a regulatory principle rather than an objective. The noble Lord, Lord Vaux, asked about the difference between the two, while my noble friend Lord Bridges asked what would happen if objectives and principles are in tension with each other. On the question of objectives versus principles, the FCA and the PRA are required to advance their objectives when discharging their functions. The regulatory principles, on the other hand, are principles that the FCA and the PRA are required to take into account when discharging their functions. Having the net-zero target as a regulatory principle ensures that the Government’s commitment to achieve net zero will be embedded across the FCA’s and the PRA’s considerations when they discharge their general functions. The net-zero target is a cross-cutting government policy that we have seen in many different pieces of legislation that we have taken forward through this House. On the specific goal, many of the levers sit outside financial services regulation, so it is appropriately progressed by the FCA and the PRA as a regulatory principle, which means that they will consider it in advancing their own objectives.
Another significant focus of today’s debate has been, rightly, on how we hold the regulators to account for their progress in furthering their objectives and regulatory principles and their broader approach to regulation. Any Minister would be wise to listen carefully when an issue draws such a diverse set of voices from across the House as we have heard today.
It is worth setting out the parliamentary scrutiny and oversight procedures that are already a key part of the FiSMA process and how the Bill builds on those. There are already robust mechanisms to ensure appropriate parliamentary scrutiny of the regulators. Select Committees play an extremely important role in this process, as we have heard. As noble Lords know and have pointed out, they have the power to call for persons, papers and records that they consider relevant, and committees in both Houses regularly exercise this power to hold the regulators to account. Senior officials from the regulators attend general accountability hearings. For example, the FCA chair and chief executive appear before the Treasury Select Committee, or TSC, twice a year, and the chief executive of the PRA appears before the TSC after the publication of each annual report.
Parliament, through the TSC, conducts the pre-commencement hearings following the appointment of the chair and chief executive of the FCA, and the  chief executive of the PRA. Most recently, the TSC held a pre-commencement hearing for the new FCA chair on 14 December before he takes up his role next month. FiSMA requires the Treasury to lay the regulators’ annual reports before Parliament.
The Bill builds on and strengthens these existing mechanisms of parliamentary scrutiny. First, the Bill requires the regulators to notify the Treasury Select Committee when they publish a consultation. Secondly, the Bill requires the regulators to respond formally to representations made by any parliamentary committee. I note the suggestion from the noble Lord, Lord Tunnicliffe, that the Economic Affairs Committee of the House of Lords should also be notified, and I am happy to discuss that proposal with him as the Bill progresses. I note that the noble Lord, along with many other noble Lords, proposed alternative committee structures, including Joint Committee structures, to scrutinise the work of the regulators. But here it is Parliament’s responsibility to determine the best structure for its ongoing scrutiny of the regulators, and the Government do not intend to make any recommendations to Parliament on this matter. In response to the noble Lord, Lord Blackwell, and others, I am sure that those responsible for determining those structures in Parliament will follow our debate on this question very carefully.
However, I would add that the additional accountability and reporting mechanisms provided by this Bill are designed to assist Parliament and government in holding the regulators to account. For example, when the regulators make rules using the powers that FiSMA gives them, they are required to do so in a way that advances their objectives. When notifying the TSC of a consultation, the regulators will be required to set out the ways in which their proposals advance the objectives and are compatible with their regulatory principles. This will support ex ante scrutiny of proposed rules at a point in the process where there is scope to influence the final outcome.
The changes that the Bill makes regarding cost-benefit analysis, including the additional challenge provided through the formation of a new cost-benefit analysis panel, will ensure that Parliament has access to high-quality information on the expected costs and benefits of new regulatory proposals to inform their scrutiny. The Treasury may also make recommendations to the regulators on aspects of the Government’s economic policy to which the regulators should have regard, known as remit letters. The new provisions in Clause 33, with equivalent provision made elsewhere in the Bill for the Bank of England and the Payment Systems Regulator, will require the regulators to respond in writing to these recommendations and the Treasury to lay the responses before Parliament. Clause 37 enables the Treasury to require the regulators to publish relevant information on a more frequent basis than in their annual reports, or in greater detail. This can also be used to support parliamentary scrutiny and oversight. For example, it could be used to publish further information on authorisation decisions, as highlighted by my noble friend Lord Hill.
These changes are designed to support Parliament in fulfilling its existing role in scrutinising the work of regulators. If there is a concern that any of the regulators’  rules are not operating effectively, the Bill gives the Treasury a power to require the regulator to review its rules when this is in the public interest. When appropriate, the Treasury may specify that the review should be carried out by an independent person rather than the regulator.
I reassure the noble Lord, Lord Tunnicliffe, that the Government expect that this power will be used only exceptionally, and that any such direction must be laid before Parliament, but I think noble Lords will agree that it is an important element of these reforms. I also expect that, in considering the exercise of this power, the Treasury will consider representations from relevant parties, including within Parliament.
The provisions we have put forward in the Bill seek to balance the operational independence of the regulators with clear accountability mechanisms and appropriate democratic input. We have heard a range of views on where that balance should lie, and the Government are confident that we have struck it in an appropriate way. We will continue to listen and will discuss further ideas in Committee in a thoughtful and constructive way, and will welcome suggestions from noble Lords in this area, including from my noble friend Lord Ashcombe, who I congratulate on his maiden speech, as I do my noble friend Lady Lawlor on her contribution to the debate today.
More broadly, on the regulators’ capacity to take on their further responsibilities, my noble friend Lord Grimstone asked about the FCA board. The Government believe that the board comprises members with extensive and broad experience in financial services, consumer advocacy and governance, among other things. The Government are further strengthening the FCA board this year, with Ashley Alder starting as the new FCA chair, as I already referenced. The Government are also running a campaign to appoint at least two new non-executive directors.
The noble Lords, Lord Sikka and Lord Mountevans, asked about FCA capacity more broadly. As noble Lords will be aware, the FCA is part-way through a transformation programme designed to make it a more innovative, assertive and adaptive regulator. Among other things, it aims to ensure that the FCA can make fast and effective decisions and prioritise the right outcomes for consumers, markets and firms. The Government continue to engage the regulator on its work here.
On innovation more broadly, many noble Lords asked about the Government’s strategic approach to crypto assets. We are committed to creating a regulatory environment in which firms can innovate while crucially maintaining financial stability and regulatory standards, so that people can use new technologies safely and reliably. We have already taken action in the area of crypto—for example, bringing it into the remit of the anti-money laundering regime and banning the sale of crypto asset derivatives to consumers. We are committed to consulting on a broader set of crypto assets, including those primarily used as a means of investment, such as bitcoin. My understanding is that it is still the intention for the Royal Mint to create a new NFT, and an update on this work will be provided in due course. It will be the regulations under the Bill that will allow for the  regulation of stablecoins, backed by fiat currency. I can say in response to the noble Lord, Lord Cromwell, that specific definitions will be provided for that in secondary legislation.
The noble Lord, Lord Vaux, asked about the operation of regulatory sandboxes. The Government have emphasised that the testing of technology and practices in an FMI sandbox should not compromise existing regulatory outcomes, including market integrity and financial stability. The Treasury and regulators will very carefully consider what sort of investors should be able to use platforms in a sandbox. If consumers are allowed to use a platform participating in a sandbox, it is essential that the platform operates in a way that is consistent with existing regulatory objectives relating to consumer protection.
I turn to consumer protection and financial inclusion, an issue raised by a number of noble Lords, many of whom have done very important work in this area, and I am grateful to them for that. The noble Baronesses, Lady Twycross, Lady Bryan and Lady Tyler, the noble Lord, Lord Tunnicliffe, my noble friend Lord Holmes and others highlighted the important role that cash continues to play for many. The Government are committed to ensuring through the Bill reasonable access to cash across the UK. The FCA is best placed to deliver an effective, agile and evidence-based approach to regulating access to cash that can endure over time, and the Bill will allow for that. In approaching the policy statement that will inform this, the Government will consider how effective industry schemes have been in ensuring reasonable, free access to cash for individuals, and the policy statement is the right place to consider this matter further. The Government will reflect on the views of parliamentarians when crafting that statement.
The right reverend Prelate the Bishop of St Albans asked how rurality will be considered in that process. The FCA will be obliged to consider local as well as national deficiencies in cash, which would be relevant in rural areas; even if it is not subject to the same rural-proofing guidance, it will be subject to the equality duties around protected characteristics in undertaking that work. Where closure of bank branches affects access to cash, intervening in a closure would be within the scope of the FCA’s new powers in the Bill, provided that this fulfilled the purpose of seeking to ensure reasonable provision of cash access services. More broadly, decisions on in-person banking services are made by the providers of those services. However, that is still governed by the FCA’s existing powers and recently strengthened guidance on actions that must be taken when people seek to close branches to ensure that customers are treated fairly.
Financial fraud was raised by the noble Lords, Lord Hunt and Lord Tunnicliffe, my noble friend Lord Northbrook and many others. In financial services specifically, this Bill takes a crucial step forward in protecting victims of APP fraud. I emphasise that the measure enables the Payment Systems Regulator to take action in relation to any payment system that it regulates, not just faster payments. However, the initial focus is on faster payments because that is where the vast majority of APP fraud currently takes place.  The Government expect protections for consumers in other payment systems to keep pace with those established for faster payments.
More broadly, noble Lords are right that tackling fraud requires a unified and co-ordinated response from government, law enforcement and the private sector. I attended a meeting of the Joint Fraud Taskforce, which brings those different players together, just before the end of last year. The Government are committed to publishing their national fraud strategy later this year.
The consumer duty versus the duty of care was raised by many noble Lords. The FCA’s consumer duty consultation paper explains that there is a lack of consensus on exactly what constitutes a duty of care in this context. It cannot be exhaustively defined, but the FCA’s view is that a duty of care is a positive obligation on a person to ensure that their conduct towards others meets a set standard. It believes the consumer duty meets that definition.
The noble Lord, Lord Davies of Brixton, rightly and powerfully raised the challenges those with mental health issues can face when accessing or using financial services. The Government have taken quite a bit of action in this area, such as the introduction of the breathing space scheme for problem debt. The FCA has also been clear about the need for firms to respond flexibly to the needs of customers with characteristics of vulnerability, which includes mental health.
Buy now, pay later was raised by the noble Lords, Lord Hunt and Lord Balfe. We committed to bring this into regulation and will publish a consultation on draft legislation very soon. We intend to lay secondary legislation in mid-2023, so action on that is under way.
Finally, I am conscious of time, but I must turn more broadly to sustainability and green finance issues, as raised by the noble Baronesses, Lady Hayman, Lady Sheehan and Lady Northover, and many others. They are right that the financial services sector has a critical role to play in global efforts to meet net zero. That is why we have included the measure in the Bill to amend the regulators’ regulatory principles to advance the net-zero objective.
I will not dwell on that any further, except to respond to a point made by the noble Baroness, Lady Hayman, on the French and German regulators having climate change objectives. The codes and objectives for French and German regulators focus on instances of financial risk and greenwashing; the FCA can already consider these issues through advancing its operational objectives to ensure appropriate consumer protection and protect market integrity, and the PRA can similarly consider climate-related financial risks under its existing objective to ensure the safety and soundness of its regulated firms.
More broadly, noble Lords asked about measures that go beyond those in this Bill. I reassure them that work continues on taking forward the policies in the Greening Finance road map, including introducing economy-wide sustainability disclosure requirements—the FCA has launched its consultation on this already—and introducing transition planning requirements. We have also launched the transition plan task force, which has published its consultation, which will close next month. We are committed to updating our Green Finance Strategy  early this year, setting out our approach on the green taxonomy and having a net-zero aligned financial sector. I am sure we will have many more discussions on this topic in Committee, which I look forward to, including on deforestation, which was raised by the noble Baroness, Lady Sheehan, and my noble friend Lord Randall.
On deforestation, financial institutions rely on the information disclosed by companies trading in these forest-risk commodities in order to take action, so a global framework for this disclosure is needed to make any action by UK financial services and firms overseas workable. That is exactly why we are a leading backer on the Taskforce on Nature-related Financial Disclosures. I was really happy to meet the task force in Montreal at COP 15 to discuss its work and how we are taking it forward.
I am out of time. I will pick up further questions from the debate in writing; I have not been able to cover them all here. To conclude, this is a landmark Bill, which I think many of the speakers in this debate have recognised, and the most ambitious reform of our regulatory framework in over 20 years. The Government are committed to building an open, green and  technologically advanced financial services sector to deliver better outcomes for consumers and businesses. I am confident that the Financial Services and Markets Bill delivers on this commitment.
Bill read a second time.

Order of Consideration Motion

Baroness Penn: Moved by Baroness Penn
That the Bill be committed to a Grand Committee, and that it be an instruction to the Grand Committee that they consider the Bill in the following order: Clause 1, Schedule, Clause 2, Schedule 2, Clauses 3 to 8, Schedule 3, Clauses 9 to 13, Schedule 4, Clauses 14 to 20, Schedule 5, Clause 21, Schedule 6, Clauses 22 to 48, Schedule 7, Clauses 49 to 51, Schedule 8, Clause 52, Schedule 9, Clause 53, Schedule 10, Clause 54, Schedule 11, Clause 55, Schedules 12 and 13, Clauses 56 to 69, Schedule 14, Clauses 70 to 79, Title.
Motion agreed.
House adjourned at 9.37 pm.